Debt Advice - Bankruptcy pro's and con's

[ATM]

So my friend has got himself into the red with his unsecured debt which is all CC. He has stopped paying them and told them he can only afford something like £20 a month. Most accepted but one sent it to court and he now has a CCJ agreeing to allow him to pay £20 per month. He owns a property mortgaged which he rents out as he now lives with his parents because he got into difficulty financially. So they are supporting him. The property is probably into negative equity and the rent does not quite cover the mortgage each month. He is currently out of work and probably depressed too.

Anyway he has been told by his brother he is better going bankrupt. I thought this was not the best idea. Worst case his unsecured debt will all go CCJ and he can keep his house. I was thinking he should maybe try to sell the house but how do you sell a House with negative equity?

If he does go Bankrupt what are the pro's and con's.

Thanks in advance.....

[Agrilla]

Your mate is best off seeking some advice from CCCS

Consumer Credit Counselling Service is a registered charity whose purpose is to assist people in financial difficulty by providing free, impartial and realistic advice.

Edited by Agrilla on Sunday 12th September 22:04

[bogie]

go and see the citizens advice people, they will explain it all to you

likely if you have little or no income, and large debts, and IVA may be an option, rather than bankruptcy, which is not really recommended as it really buggers your life up for 5 years or more

[bennyboydurham]

Doesn't necessarily affect you for life. I know plenty of former bankrupts who have normal mortgages and gold bank cards.

Bankrupts will be normally discharged within a year or less and it stays on your credit file for 6 years, as does being in default or having a CCJ, so it doesn't make a lot of difference.

If his house is in negative equity and he can't pay his unsecured debt then he's really nothing to lose. I would imagine by now that the respective banks have already written off the debt against their profits and sold them on to collection agencies. Better to be bankrupt and free to begin again older and wiser than harassed by shyster debt collection companies for the next 15 years.

Edited by bennyboydurham on Wednesday 8th September 23:32

[grumbledoak]

Get professional advice. Really.

[smartie]

It really depends on his total level of debt, his earning capacity (now and in the near future) and if he has either assets or any kind of professional status to protect.

Whilst I agree he should repay his debts if this is possible, equally it shouldn't be a burden to him for the next 15+ years so if things are really insurmountable then he does need to consider his options.

[Steve H]

I have been told that once you are bankrupt, future earnings are not taken into account! (This is from a friend who went to court on Monday)

I fail to see how this could be true, £20k in debt and no assets and made bankrupt, if he then finds a job on £500pw why wouldn't the court want some of it??????

He reckons not!

[Steve H]

musclecarmad said:

Steve H said:

I have been told that once you are bankrupt, future earnings are not taken into account! (This is from a friend who went to court on Monday)

I fail to see how this could be true, £20k in debt and no assets and made bankrupt, if he then finds a job on £500pw why wouldn't the court want some of it??????

He reckons not!

once out of bankruptcy they don't take your earnings into account, whilst in bankruptcy they do. so he can just sit on the sideline for a year or so doing nothing then get a good job (some jobs don't like ex bankrupts)

He said he could get a job the day after and they wouldn't touch his earnings!

[bennyboydurham]

Steve H said:

musclecarmad said:

Steve H said:

I have been told that once you are bankrupt, future earnings are not taken into account! (This is from a friend who went to court on Monday)

I fail to see how this could be true, £20k in debt and no assets and made bankrupt, if he then finds a job on £500pw why wouldn't the court want some of it??????

He reckons not!

once out of bankruptcy they don't take your earnings into account, whilst in bankruptcy they do. so he can just sit on the sideline for a year or so doing nothing then get a good job (some jobs don't like ex bankrupts)

He said he could get a job the day after and they wouldn't touch his earnings!

Not strictly true, depends on who looks after your case. It may be that he slinks off into the sunset never to hear from them again until he gets discharged, especially if it is pretty clear that he had no assets and no realistic chance to start earning proper money anytime soon. If however he got a well-paid job whilst still in bankruptcy and failed to inform the receiver and they subsequently found out he'd be in the st. They'd want a proportion of it and could bounce him back into bankruptcy for much longer for not playing by the rules.

[Ladyhayles]

I work in insolvency and I can't stress enough about how important it is to go and seek professional advice with full details of all your debts. Providing a small amount of info on here really isn't enough to make an informed decision and it isn't as simple as people would like to believe.
Insolvency law is constantly evolving and he needs to get advice based on current law.

[theboss]

bennyboydurham said:

Steve H said:

musclecarmad said:

Steve H said:

I have been told that once you are bankrupt, future earnings are not taken into account! (This is from a friend who went to court on Monday)

I fail to see how this could be true, £20k in debt and no assets and made bankrupt, if he then finds a job on £500pw why wouldn't the court want some of it??????

He reckons not!

once out of bankruptcy they don't take your earnings into account, whilst in bankruptcy they do. so he can just sit on the sideline for a year or so doing nothing then get a good job (some jobs don't like ex bankrupts)

He said he could get a job the day after and they wouldn't touch his earnings!

Not strictly true, depends on who looks after your case. It may be that he slinks off into the sunset never to hear from them again until he gets discharged, especially if it is pretty clear that he had no assets and no realistic chance to start earning proper money anytime soon. If however he got a well-paid job whilst still in bankruptcy and failed to inform the receiver and they subsequently found out he'd be in the st. They'd want a proportion of it and could bounce him back into bankruptcy for much longer for not playing by the rules.

Absolutely.

Immediately after the bankruptcy order is made the official receiver will conduct an interview and scrutinise the bankrupt's income/outgoings in detail. Any deemed 'surplus' income can be confiscated to pay creditors, this can be obtained under a court order if the bankrupt doesn't co-operate willingly. Any such payment agreement can last three years, i.e. even after discharge.

Also I believe that any other income in the period between the bankruptcy and the discharge must be declared to the receiver, for example bonuses, inheritences, lottery wins, etc. ANY buggering around at this stage, trying to 'pull a fast one' concealing income or assets, could land the bankrupt in more trouble than he can imagine.

So the 'best' outcome for the OP's friend would be to have a modest income which just covers household expenses at the time of bankruptcy, with no potential for the reciever to go for an income payment agreement; hope that his lucky lottery win / big inheritence doesn't come that year; cooperate fully at every stage with the receiver and not try to conceal any income or assets; get discharged 8 months later when the receiver is fully satisfied that it's a 'simple' case; get a whopping pay rise a few months when he's out of the woods.