Guide To Bankruptcy & IVA’s, Individual Voluntary Arrangements

The Guide to Bankruptcy & IVA's

This is the complete guide to bankruptcy and IVA’s also known as Individual Voluntary Arrangements.

We prepared this guide to help people understand exactly what bankruptcy and entering an individual voluntary arrangement (IVA) involves and to help people make the right decision.

So, if you are struggling financially and unsure of which option to take we think you will find this guide useful. It’s a comprehensive guide to the realities of bankruptcy and an IVA. Enjoy reading it and if you have any questions please ask at the bottom of the guide and we will respond.

How can we help you?

Contact us using our enquiry form.

Contents

Chapter 1

Introduction

Bankruptcy or IVA Which is the better option?

Chapter 2

Individual Voluntary Arrangements

What is an IVA?

Chapter 3

Bankruptcy

What is bankruptcy?

Chapter 4

Debt Relief Orders

What are debt relief orders?

Chapter 5

Bankruptcy and the Economy

Does bankruptcy help the economy?

Chapter 6

Fraud-Travelling-Banking If Bankrupt

Realities of being bankrupt

Chapter 7

Bankruptcy and IVA’s Whilst Living Abroad

Living abroad while bankrupt or on an IVA

Chapter 8

Bankruptcy and IVA FAQ’s

Top bankruptcy and IVA questions answered

Introduction
Bankruptcy or IVA,
Which is the better option?

 

The answer to this very question, which is the better option in handling a debt or financial situation, going bankrupt, or entering into an IVA/Individual Voluntary Arrangement, while on the surface seems easy to answer, when looked at in detail, is not that simple a choice.

There are many factors and variables that need to be looked at, and can influence a major financial decision such as this.  There are also long-term implications to either choice.

If you should find yourself in debt and looking as to what your options or solutions may be with those debts, there are many options available, such as a Debt Management Plan, Token Payment Arrangement, all of which are informal plans, in addition, a couple of additional options that are formal debt solutions, may be an IVA or Individual Voluntary Arrangement, or Bankruptcy.

Both are forms of insolvency, insolvency being when your debts exceed your assets. If you have more liabilities than assets, you are insolvent, and two forms of insolvency are IVA’s and Bankruptcy.

While they are different in many ways, they both are forms of insolvency. And with both Bankruptcy and an IVA, your name is placed on the insolvency register.

IVA’s are a way to repay your debts in a manner you can afford. You may also be able to keep assets such as property in an IVA.

Bankruptcy is a way to simply be relieved of the debt obligations in a period of 12 months. If you have property, and the property has equity, in bankruptcy you could lose the property.

Both has their positives and negatives, and implications.

There are a few factors in making this decision we will discuss further on:

  • What is the total amount of unsecured debt you have?
  • Are the accounts in just your name?
  • Do you own any property or other assets?
  • Does your property have any equity?
  • And lastly, what is it you wish to accomplish? Getting out of debt is a given, but there may be some other future things you want to do, and your choice of insolvency, could impact those accomplishments.

 

So let’s take a look at both IVA’ s and Bankruptcy in detail, and also look at what happens when you finish these programmes and find yourself debt free, and also what it can be like for someone to go bankrupt.

Individual Voluntary Arrangements
What is an IVA?

IVA’s or Individual Voluntary Arrangements were born in the UK out of the Insolvency Act of 1986. Part VIII of the Insolvency Act of 1986 establishes IVA’s, and “constitutes a formal repayment proposal presented to a debtor’s creditors via an Insolvency Practitioner or IP”.

IVA’s are a formal agreement between the debtor and all their unsecured creditors which overrides the original agreement or contract for the debt or loan. It in essence rewrites the terms of the loan or debt.

IVA’s are only for unsecured debts, loans, credit cards, catalogues, etc, and are an alternative to bankruptcy.

 

How does an IVA work?

The basics of an IVA are that the debtor makes payments of what they can afford into the IVA for a period of five (5) years, during which time the creditors freeze the accounts to all interest and charges. If the debtor has a property that has equity, they can be required to release a portion of any equity in the property to the IVA in the fifth and final year. After the five (5) years, any remaining balances on the accounts are written off by their creditors, and the debtor is out of debt and starting fresh.

The releasing of equity from a property in the fifth and final year into the IVA is usually done through a remortgage of the property.

In order for a debtor to qualify or have their debts considered for an IVA, they do need to be working and have the ability to fund or pay the IVA. They also need to have the minimum level of debt required for an IVA; this can vary but on average needs to be a minimum of £12,000 to £15,000 of debt between two (2) or more different creditors. Some IVA providers state that the level of debt can be as low as £7,000 or less, this again can vary.

If the debts/accounts to be placed in an IVA are jointly held, it is best if both parties enter into the IVA. If they both do not enter into the IVA, the one party that does not go into the IVA, can be held responsible for the remaining payments and balances of the joint accounts.

Who Sets-up an IVA?

IVA’s are set-up and administered by Insolvency Practitioners or IP’s. They are the ones that complete the forms and proposals and act as a mediator so to speak, between you and your creditors.

Once it has been established that you have the level of debt required to do 
an IVA, and meet the basic requirements, a detailed income and expenditure 
form is completed outlining all your income and expenses. This form shows 
your monthly expenses such as rent or mortgage, council taxes, food, petrol, 
electricity, gas, TV licence, insurances, cable, Internet, etc, all your monthly 
bills minus your debts. It also shows all your wages, tax credits, any benefits, 
you receive. Once the math is done subtracting your allowed bills and 
expenditures from your wages, the amount that is left, the surplus income, is 
what is considered for payment into an IVA.

There is a minimum required payment to an IVA, this is based on the level of debt you may have and also what the final return may be to your creditors. In most instances creditors are looking for a 25% return as a minimum. This means that they hope to get 25% of the total balance owed to them back during the course of the IVA. Again, this can vary according to how the IVA is structured, and also what the debtor can afford to pay.

Lower initial monthly payments may be accepted for an IVA, if an equity release later is substantial.

If for any reason you do not meet the minimum payment required for an IVA, there are other debt options such as a debt management plan or token payment plan.

Once the payment amount you can afford is calculated, the IP puts together
a proposal to be sent to all your unsecured creditors. Only unsecured debts
can be included in an IVA. Your creditors then vote as to if they will accept
the proposal or not. As long as the majority, 75%, of your creditors agree to
the IVA, or the creditor with the majority of your debt agrees, again 75%,
the proposal is binding to all your creditors.

You then begin your monthly IVA payments, your creditors freeze the accounts to any new charges and interest. If you have property with equity, it will be outlined in the IVA that a portion of that equity will be released and paid into the IVA in the fifth and final year to in essence buy-out the IVA. This equity release is usually done through a re-mortgaging of the property.

If for any reason you cannot re-mortgage your property to release the agreed amount of equity, payments into the IVA can be continued for an additional period, possibly six (6) months or up to 12 months to make up this difference from the lack of a remortgage.

By entering into an IVA you are asking for assistance in paying back your debts, which is similar to bankruptcy; both an IVA and bankruptcy are forms of insolvency, and as such anyone bankrupt or in an IVA can have their names placed on the insolvency register on the government’s insolvency web site.

This needs to be stressed as there are many of the same restrictions in an IVA, as there are if one goes Bankrupt.

In addition, both Bankruptcy and an IVA do have an effect on your credit history and credit score.

Some of those restrictions of being in an IVA are:

  • Taking out new credit: If you are in an IVA, you are technically not allowed to take out any new credit. Not that you may wish to anyway, and due to being in an IVA, and the affects on your credit, you may find this difficult to be approved.
  • You are obligated to notify the IP of any changes: Should your financial situation change, for the better, or the worse, you need to notify the IP handing your IVA. Any windfalls you may receive, could be used for the IVA.

IVA’s can be reviewed on an annual basis for these changes. Should you receive a pay rise, a portion of this rise could be taken for the IVA.

Creditors offering this assistance in the form of an IVA, want to maximise their returns, which means if you can afford to repay more, they will want you to do so.

Are There Fees For an IVA?

There are fees for an IVA, the fees are to the IP for the set-up and administration of the IVA. These fees can be high in some instances, but these fees come out of the monthly payments the debtor makes into the IVA. There are no out-of-pocket costs to the debtor for the IVA, and should the IVA fail, the debtor owes no fees. These fees are transparent to the creditors and the creditors have agreed to the fees charged.

Once the IVA is voted on and agreed, the debtor begins their IVA payments. The IVA can be reviewed on an annual basis to see if any changes have taken place. Should the debtor have a change in their
circumstance, such as a pay rise, windfall of money, etc, they are required to report this to the IP, who in turn may look at increasing the IVA payments.

In addition, should someone in an IVA experience a loss or reduction of income, there may be some options open to them to reduce the IVA payments, or take a break from the IVA payments.

What Happens at the End of an IVA?

Once a debtor makes their IVA contributions for the full five (5) years, the creditors write off the remaining balances at the end of those 5 years and the debtor is debt free. If there is property involved, then a re-mortgage or some means to release the agreed upon equity must take place to buy-out the IVA. If for any reason a re-mortgage or equity release cannot be arranged, then the IP can prolong the payment period for the IVA even up to an additional 12 months.

If no payments are made into the IVA, usually for a period of three (3) consecutive months, the IVA can be deemed as failed. Once an IVA has failed your creditors can then begin the process of attempting to collect the debts again. Once an IVA has failed, the debtor can try to have the IP set-up a new IVA or look to other debt solutions.

What if I Cannot Do an IVA, I Don’t Qualify?

So what debt options are there for someone who cannot do an IVA or has an IVA that has failed?

Bankruptcy is always an option, however for some people with property it is not a good option as they may lose their property.

A Debt Management Plan is a suitable alternative to an IVA for those that may not qualify for an IVA, or whose IVA has failed for whatever reason.

Debt Management Plans are not as formal as IVA’s, and can take longer to complete, but can also offer more flexibility.

Debt Management Plans can also be used as a stepping stone to move towards an IVA at a later date when one may qualify.

Full and Final IVA’s/Offers

In some instances it may be possible to offer a lump sum, one payment to an
IVA to pay off all the accounts, and get out of debt.

These offers are called a “full and final settlement” and are a way for 
someone to settle their debts even if they cannot make monthly payments 
into an IVA.

Examples of where a full and final settlement may work is where the debtor has a lump sum of money to offer to their creditors, but it is not enough to repay the full balances.

Just as in a payment IVA, an IP puts forth a proposal for a settlement payment to be made (a pence on the pound offer), the creditors vote and the majority carries to approve the settlement.

A good example of this is the following:

A person owes £20,000 in unsecured debts, has no property with equity, and is made redundant.

They receive a redundancy payment of £10,000. This redundancy payment may be used to make a one-off offer to settle the accounts through a full and final IVA.

The debtor could offer settlements to each individual creditor on their own outside of an IVA, however, getting all to agree on a settlement can prove very difficult as each creditor wants to get the most for themselves.

A full and final IVA alleviates this issue as all creditors have a vote, and the majority carries the IVA.

Should a person putting forth a full and final IVA be able to make payments, even with the settlement offer, the creditors can request the lump sum, and some form of monthly payments.

As the creditors are offering this huge concession in what is being paid back, they again want to maximise their returns, so they may accept the lump sum, and payments to increase what they may receive.

Overview of an IVA:

  • Formally binding agreement with your creditors
  • The accounts are frozen so no new interest or charges are accruing
  • Is a five (5) year term, at the end of the five years you are debt free
  • Need a minimum of £12,000 – £15,000 of debt
  • Creditors reduce the balances on the accounts, you pay back a pence on the pound percentage
  • A formal arrangement with your creditors, they agree to accept the payments you can afford and you are not chased for any additional payments
  • A way to preserve property as in bankruptcy you may lose the property
  • Possibility of a full and final settlement offer

A Few Points to Consider About IVA’s:

  • Since it is a formal agreement it must be adhered to
  • Any increase in income or windfalls need to be reported and can be taken for the IVA
  • If you have property and cannot remortgage or release equity through other means the IVA
    payments can be extended

As you can see, IVA’s are a valuable tool in aiding someone who may be insolvent, and wants to repay their creditors, or for some reason chooses to want to avoid bankruptcy.

IVA’s Impact On Credit and Credit Score

It has been mentioned numerous times here, IVA’s as a form of insolvency do have a negative impact on your credit history, and you are placed on the insolvency register.

While this may sound harsh at first, the reality is not so bad.

You are being allowed a way to repay your accounts in a manner in which you can afford, and if you have property, are being allowed to keep that property.

Since IVA’s or any payments outside of the original contracted agreement, can affect your credit history and score, IVA’s are no different.

The things to remember are two-fold:

  • Everything stays on your credit history for a period of six (6) years.
  • IVA’s are usually for a five (5) year period.

This means that one (1) year after the IVA has been completed, not only have you been debt free for the past year, but the IVA and any negative impact on your credit history will drop off as it hits the 6 year mark.

You are getting not just a debt free fresh start, but a credit history fresh start.

If a person entering into an IVA is married or lives with a partner, the IVA only affects that person’s credit, not the partner or spouse who is not involved in the IVA.

If there are joint accounts, as we have discussed, then there can be implications.

Advantages

  • You are debt free in five (5) years
  • It allows you to keep your property.
  • Monthly payments based on what you can afford each month
  • Formally binding agreement
  • Avoid bankruptcy

Disadvantages

  • There is a minimum monthly payment your creditors will accept
  • A majority creditor could reject the IVA, which causes the entire IVA to be rejected
  • Not everyone can qualify to re-mortgage to release equity in the final year of the IVA
  • The IVA is reviewed annually, any increases in income may be taken for the IVA
  • Does affect your credit rating
  • Failure to make payments could result in your being made bankrupt.

Now let’s look at the another insolvency option, Bankruptcy.

Bankruptcy
What is Bankruptcy?

To some, Bankrupty may seem to be the harshest form of insolvency, but the fact is if you are insolvent, you are insolvent. There is no real degree of insolvency, no one is 50% insolvent, or 72% insolvent.

The decision to go bankrupt is not one to enter into lightly, and all options should be researched and explored prior to going bankrupt. Speaking to a qualified debt advisor or counsellor and having all other debt options explained to you is a must.

Some people can avoid bankruptcy by entering into a Debt Management Plan or possibly an IVA/Individual Voluntary Arrangement. These forms of debt management need to be researched and considered prior to making the final decision to go bankrupt.

There are those that bankruptcy is the strongest option for them to be relieved of their debts. And for those, having the knowledge of what will occur and what to expect, can remove any fear or concerns someone may have about bankruptcy. Knowing what will happen can lift the veil of fear, fear of the unknown.

The actual process of going bankrupt is fairly straight forward. You obtain and complete the bankruptcy forms, which you can get either through the courts or at the government’s insolvency service’s web site, in addition, you can apply to go bankrupt online.

While bankruptcy, like an IVA, and other forms of debt management, is only for unsecured debts, if a person has a secured debt, such as a mortgage, and the property is repossessed and sold, any shortfall or deficiency balance, is then an unsecured debt, and an be included in a bankruptcy, or an IVA.

The Forms

There are two (2) main forms that need to be completed, the statement of affairs form 6.28 and form 6.27, the debtors petition form.

Form 6.27 asks the following:

  • Your name, place of residence and occupation
  • The name of any business you run and whether you run that business alone or with others
  • The nature and address of your business
  • If you no longer run a business but you did during the period that you built up your debts then you will have to disclose that business also.
  • The address or addresses that you resided at or carried on during that period
  • A statement that you are unable to pay your debts
  • A request that the bankruptcy order be made
  • Particulars of any insolvency proceedings that have taken place in the last five years.
  • If an IVA is in force then the name and address of your supervisor
  • Form 6.28 the statement of affairs, asks the following:
  • Name and address of your secured creditors with amounts owed, value of assets, nature of security, etc
  • Name and address of your unsecured creditors
  • Details of your assets, including joint assets
  • Income and expenditure
  • Details of any dependants
  • Details of any attempts to come to an agreement with your creditor’s and whether an IVA is likely to be acceptable.
  • Details of any assets transferred away recently (such as property, or cars, etc)

Once you complete the forms, or if you are not 100% comfortable doing so, you can have someone or an organisation assist you in doing this, you file the bankruptcy forms at your local County Court, or if you reside in London, the High Court, or again, you can file for bankruptcy now online.

Filling the Bankruptcy Forms and The Fees

When you file the bankruptcy forms at the court or online, you will be required to pay the fees to go bankrupt; currently these fees are £680 per person filing. These fees are £130 court fees and £550 receiver’s fees. If you meet the courts criteria you may be eligible for a reduction in the court’s fee of £130.

Bankruptcy fees can now be paid in instalments, but the bankruptcy itself is not properly filed until all fees have been paid.

It is there at court, if you file in a court, that a judge will declare you bankrupt. This part of the process can be very simple and you may or may not even be seen by the judge. In most instances you are declared bankrupt the day you file the bankruptcy forms.

Can a Creditor Make You Bankrupt?

In the past if you owed someone £750 or more, they could make you bankrupt. This amount required to make someone bankrupt has been raised to £5,000, which has caused the number of creditor filed bankruptcies to decrease over 12%.

The main issue is in having a creditor make someone bankrupt is that they then pay the fees required for the bankruptcy. In addition, in bankruptcy all your creditors are treated equally, so the one creditor making you bankrupt does not get any preferred treatment.

The Official Receiver

Once declared bankrupt an Official Receiver will be appointed to handle your bankruptcy case. The Official Receiver or OR’s job is to review your bankruptcy forms, and see if you have any assets, such as property, which can be disposed of or liquidated to pay into the bankruptcy, and also if you have any left over money each month to pay into the bankruptcy. They also will contact your creditors to inform them that you have been declared bankrupt and to cease all contact and communications with you.

The Official Receiver will also contact any bank that you be banking with or have a relationship with. The bank in turn will freeze any account you have with them. This can make paying bills and living difficult, however, you are allowed a basic account whilst bankrupt; and it can be a good idea to have this account in place prior to going bankrupt.

Many banks in the past were refusing someone who is bankrupt a bank account, even a basic account. This was due to the fact banks were concerned over the Trustee in a bankruptcy making a claim against the bank that held the account.

This was being challenged and changed to allow bankrupts a basic bank account.

If You Have Property

If you have any property with equity, then a Trustee may be appointed to sell
off or deal with the property. Properties now in bankruptcy are not valued or 
reviewed to be handled until near the third year after being made bankrupt, 
so while you may be discharged in one year, the Trustee can still later review
 your property to see if there is any equity to be released into the bankruptcy
 in later years.

The equity can be released by the sale of the property, or the Trustee may allow a family member, or in the case of joint ownership, the other owner, the option of buying-out, or paying the amount the Trustee wants for the bankruptcy. This preserves the property from being sold.

Making Payments Into a Bankruptcy

If you show any surplus of income that exceeds £20 after your allowed living expenses, you can be required to pay this money into the bankruptcy each month for a period of three (3) years, even though after 12 months the bankruptcy will be discharged. This is through an IPO/Income Payment Order, or IPA/Income Payment Arrangement.

So after your bankruptcy has been discharged after one (1) year, you will still make payments into the bankruptcy for a period of two (2) additional years.

Once you have been interviewed by the OR, regardless of if you have any assets or are required to pay into the bankruptcy, you remain bankrupt for a period of 12 months.

Joint Accounts

Same as with an IVA, joint accounts, or debts placed in a bankruptcy that 
either have a co-signer, guarantor, or are in two parties names, can pose a 
different situation unless both parties are going bankrupt.

If only one of the account holders is going bankrupt, or needs to go 
bankrupt, the other person who is on the account, and is not going bankrupt, 
can be held liable for the account; the full remaining balance of the account.

This is due to the fact that both parties are equally responsible for the 
account.

If an account has a guarantor, and the borrower goes bankrupt, then the guarantor can be held responsible for the account and its payments.

Bankruptcy Restrictions

During this 12 month period as a bankrupt you fall under the restrictions of bankruptcy. You cannot access credit of more than £500 unless approved by the Official Receiver, you cannot be a Director of a Limited Company, create, manage or promote a company without the court’s permission, and you cannot work as an Insolvency Practitioner.

At the end of the 12 months your bankruptcy is over, it has been discharged and you no longer owe any of the creditors you previously had. Even if you forgot to include a loan or credit card, all your unsecured debts are included in your bankruptcy, so they are automatically included. No secured debts can be included in a bankruptcy.

If for any reason you have not cooperated with the Official Receiver, or if the OR uncovers any type of fraud, or misleading information in your bankruptcy, or if you tried to hide or manipulate an asset prior to going bankrupt, such as selling a car or property and not disclosing the sale, the Official Receiver can issue a BRO or Bankruptcy Restriction Order.

A Bankruptcy Restriction Order or BRO keeps you under the restrictions of bankruptcy longer than the usual 12 months, and can keep you under the restrictions of bankruptcy for up to 15 years. This would be in severe instances. So even though your bankruptcy may be discharged after 12 months, it is conceivable that you could be under the restrictions of bankruptcy a longer period of time.

Once your bankruptcy has been discharged you should receive a bankruptcy discharge notice from the Official Receiver. If you do not receive one, you can either request one from the OR, or obtain one at the court where you were made bankrupt. The court can charge a fee of £60 for this notice.

Bankruptcy and Your Credit

Just as with any form of insolvency, such as an IVA, or any form of debt management, bankruptcy will have an impact on your credit history and credit score.

This impact does not last forever as many are led to believe.

Once a person is declared bankrupt, they are in bankruptcy for a period of 12 months, then the Bankruptcy is discharged, or over.

As everything stays on your credit history for six (6) years, five (5) years after a Bankruptcy has been discharged, it will drop off a person’s credit file.

So depending on your full set of circumstances and what it is you wish to achieve, will determine if Bankruptcy or an IVA is your best option in dealing with your debts.

Let’s take a look at life after bankruptcy, once the bankruptcy has been discharged.

What Happens When You Are Discharged From Bankruptcy

Making the decision as to if you should go bankrupt is not an easy one, and not one to be entered into lightly. You need professional advice as to how the bankruptcy will affect all aspects of your current and future finances. This is especially true if you have assets such as property. You also need to be advised of alternatives to bankruptcy and how they affect your situation.

In some instances you may not have a choice in the matter as a creditor is making you bankrupt, however, you still need sound, professional advice. If you make yourself bankrupt, or a creditor makes you bankrupt, the outcome is the same, you are bankrupt.

Many people once they make the decision to go bankrupt and file the bankruptcy forms, feel as though a weight has been lifted off them. This in many instances is due to the stress related to being in debt and struggling financially. For many people they will have struggled with their accounts and debts for years before finally getting the resolve to go bankrupt.

When you go bankrupt you are in bankruptcy for a period of 12 months. After that 12 month period your bankruptcy is discharged, which means the bankruptcy is over and the accounts you included in the bankruptcy are written off, even if you forgot an account, it is included in the bankruptcy. You no longer owe the accounts after the bankruptcy is discharged, and you are getting a fresh start.

A Slight Overview of What We Have Discussed Regarding Bankruptcy

When you are made bankrupt, an Official Receiver is appointed to review your forms and see what assets you may have, or if you can afford to pay into the bankruptcy.

If you have any surplus of income after your allowed living expenses that exceeds £20, you can be required to pay into the bankruptcy under an Income Payment Order or arrangement for a period of three (3) years.

Your bankruptcy will still be discharged in 12 months, you then would continue making the payments into the bankruptcy for an additional two (2) years.

When the bankruptcy is discharged you will receive a notice or certificate of discharge. If a discharge notice is not sent to you automatically, you can request one from the Official Receiver. If you request the discharge notice from the courts, they can charge a fee of £60.

The bankruptcy will stay on your credit history for a period of six (6) years, which is five (5) years after you are discharged. One aspect of bankruptcy that can seem a bit haunting is that if you are asked the very broad question, “have you ever been bankrupt or declared bankruptcy”, you are expected to disclose the fact you previously had been bankrupt.

This broad question is not just asking if you were ever made bankrupt in the UK, but have you veer been bankrupt, period. This question may be asked when someone is applying for a mortgage.

On the notice or certificate of discharge from bankruptcy, there is a notation that refers to Section 333 of the Insolvency Act.

Debt Relief Orders
What are debt relief orders?

It would be remiss in discussing IVA’ and Bankruptcy as forms of insolvency, if we were not to give the reader an overview of a third form of insolvency, Debt Relief Orders.

The easiest way to explain DRO’s is that they are very similar to Bankruptcy, but are like a “mini-bankruptcy” or “ bankruptcy light”.

What is a Debt Relief Order?

DRO’s are another form of insolvency, but for people with no assets, and debts under a certain level.

The main criteria for Debt Relief Orders is:

  • Unsecured debts under £20,000

  • No assets

  • £50 or less as surplus income each month after allowed living expenses

DRO’s were originally brought into place in April 2009, and were for people with debts under £15,000. Since then the maximum amount of debt allowed in a DRO was raised to £20,000.

It was thought that by raising the maximum debt level, it would allow more people to make use of DRO’.

The fee for a DRO is £90, which is much less than the £680 to go bankrupt.

DRO’s are widely used by people since they began in 2009, in part due to the low cost and also recently with the increase in the maximum allowed level of debt.

In 2016 there were 26,196 DRO’s filed, which is an increase of 8.4% over 2015.

DRO’s have a place in the world of insolvency, however, many people who are in the position of making a decision as to if an IVA or bankruptcy is the better option, would not be considering a DRO as they may have assets, too much debt, or too much surplus income that would allow them to enter into an IVA.

Bankruptcy and the Economy
Does Bankruptcy Help the Economy?

Many writers have used various titles of guides/blogs/writings in the past to sensationalise things, or to grab readers in the hopes the title alone lures them in.

And this title is no different.

There is a partial truth to the title about how bankruptcy helps the economy, and a partial little white fib.

When you think about it, the stigma attached to bankruptcy has faded over the years. In part due to the fact so many people have gone bankrupt, and many through no fault of their own.

Times change, and so do economic situations and sometimes people are backed into a financial wall where they are insolvent, and bankruptcy, or some other form of insolvency, is their only option.

Insolvency and bankruptcy are related, closely related, but two different animals.

Insolvency is when a person, or persons/business/company, cannot meet their financial obligations. Their liabilities exceed their assets.

Being insolvent does not mean you, or the company is bankrupt.

Bankruptcy is a formal declaration that one is insolvent and done through the courts. Bankruptcy is a sort of protected status for someone who is insolvent. They are asking the court’s protection from their creditors and whom they owe money. Once bankrupt, your creditors can no longer contact you for payment, they must wait in line and go through the courts just as all your creditors must do.

Of course there is a price to be paid for the court’s protection, and that price is a loss of financial freedom.

An Official Receiver will be appointed and they will review your finances and any assets you have and determine what can be liquidated (sold) to repay your debts. In addition, they will review your expenses and income to see if you have any money to pay into the bankruptcy.

Bankruptcy is not the only form of declaring you are insolvent.

A DRO/Debt Relief Order and an IVA/Individual Voluntary Arrangement are also forms of insolvency.

Once a person is bankrupt, they are in this status for a period of 12 months. After the 12 months the bankruptcy is said to be discharged, meaning the bankruptcy is over, and the accounts or debts are no longer owed.

It can be slightly more complicated than this if an IPO or Income Payment Order/Arrangement is issued, but in essence, after the bankruptcy or DRO is discharged, or an IVA completed, the person who was insolvent no longer owes any debt(s), and is getting a fresh start.

It is this fresh start and having no debt that aids in helping the economy.

In watching the film, “Boom Bust Boom” it touches briefly on how cycles of boom periods and then bust periods rebuild the economy. It also explores why we continue to make the same mistakes, and new ones, when it comes to investments and the economy. We haven’t seemed to learn much from history.

Still wondering how this works, bankruptcy and busts helping the economy, read on.

Insolvency Figures

In order to complete the cycle as to why and how someone going bankrupt can help the economy, we need to look at the numbers, the statistics, as to how many people are actually going bankrupt.

For 2016 the following figures are given by the government’s insolvency service:

  • 16,502 companies entered into insolvency
  • 90,930 individuals were insolvent
  • 26,196 entered into DRO’s
  • 14,989 people went bankrupt
  • 49,745 people entered into IVA’s

For the 12 months leading up to the first quarter of 2016, 1 in 576 “adults” became insolvent. This is 0.17% of the adult population.

And while this may be the lowest figure since 2005, it still is a lot of people who are insolvent.

If you use these figures and just project it ahead, it means that on average nearly, or 100,000 people a year go bankrupt or enter into some form of insolvency.

This is not counting businesses as well.

While these figures may seem grim, you can look at it and put the spin on it, there are 100,000 people getting a fresh start. They no longer owe the accounts they had, and are now just having to pay the basic monthly bills as we all do.

The Fresh Start

Here is where we see how bankruptcy can help the economy, in roundabout terms.

Once a bankruptcy has been discharged, the person who went bankrupt no longer owes the accounts/debts they had. They get a fresh start.

Regardless of how someone found themselves in financial distress and insolvent, once their bankruptcy has been discharged, they are free of any debt.

All the money they were struggling to pay towards their accounts, once any IPO is finished after three (3) years, they now have to spend. This is money that very well could be coming back into the economy in the form of consumer spending.

Of course just after being discharged from bankruptcy, your credit history is going to reflect the recent bankruptcy, and getting credit, initially, may prove difficult.

But not impossible.

Banks, lenders, know you are now debt free. Some will take a chance and extend credit, they have to, as it is a cycle, if they do not lend, they do not make money, and people going bankrupt discharge accounts, and the banks and lenders need to keep their books with borrowers.

Should you feel bad for the banks and lenders who lose money due to people going bankrupt, of course, no one wants to see a business lose money.

However, banks and lenders have factored in losses due to defaults and insolvencies, this affects the interest rates they charge. They also can write off losses off their books as well.

Someone with poor credit is going to receive a higher interest rate for a loan or credit card.

There are credit cards and lenders out there that want to aid in someone rebuilding their credit, at a price of high interest rates.

It may sound silly, but it is the cycle of the economic process.

If we as consumers do not borrow money, and spend money, the system 
collapses.

So by over-extending ourselves, or finding ourselves insolvent, we go
bankrupt, which wipes the financial slate clean. We then can spend again,
and even get credit, even if it takes six (6) years as everything drops off our
credit history in that time-frame.

By consuming/spending and getting credit, we aid in keeping the economy going.
Boom, bust, boom.

Fraud-Travelling-Banking If Bankrupt
Realities of being bankrupt

Repeatedly we have stated here in this guide, the decision to go bankrupt is one not to enter into lightly, however, for some people, bankruptcy is required to escape their current financial situation.

Getting professional advice prior to making the decision is imperative as well.

In advising people on bankruptcy over the years, there are a few areas and aspects of bankruptcy that some people don’t think of, or are aware that may need addressing before

Fraud in Bankruptcy

Is Transferring a Property Before Going Bankrupt Seen As Fraud?

What is bankruptcy fraud?

Is not disclosing an asset fraud?

Fraud – “trying to hide or transfer an asset prior to going bankrupt, not being truthful or fully disclosing all details, intentional deception made for personal gain.”

Interesting definition, and quite broad I might add.

So what about selling or transferring a property or asset prior to going bankrupt so that you can either keep the asset or keep/hide the proceeds from the sale.

Obviously if it feels icky then it is icky; if it feels wrong, then it probably is wrong.

Our advice always has been, and always will be: it is not wise to sell or transfer an asset prior to going bankrupt.

The bankruptcy forms themselves ask about any transfers or sales or property for the prior few years, so this does need to be disclosed, if you have sold or transferred property and do not disclose it, then it is as simple as lying.

Also, just because the bankruptcy forms ask about a few years back, the Official Receiver in a bankruptcy can look back even further if the need be.

And what if you have done this, what can the Receiver do, what’s the worst that can happen??

The Receiver could issue a BRO or Bankruptcy Restriction Order against you, keeping you under the restrictions of bankruptcy longer than the usual 12 months and for up to 15 years!

They also have the authority to reverse the sale or transaction, meaning they can contact who you sold or transferred the property to and attempt to get it back or the cash equivalent of the value of the property.

It can get ugly then, bringing others into your bankruptcy.

We have heard of people not just giving a property to a family member to sort of hide it, but in some instances selling a property and using the proceeds to pay back a debt to a friend or family member; which is in essence preferring that person over their other creditors.

When this is found out, and you would be surprised how these things are uncovered, the Receiver can then ask the family member who had been paid for that money back.

If the family member states they can not pay the money back, the Receiver can then chase the family member for the money. Ultimately, and in rare instances, the Receiver can make that family member bankrupt to get the funds back. And if the family member did own their own home, it could have been lost if they were made bankrupt.

So it gets not only ugly but complicated as well.

Is Hiding Assets in Insolvency Criminal?

Some people in their querying this with us ask about being charged criminally due to misrepresenting something or committing fraud in their bankruptcy: While we have not heard of anyone being charged criminally due to doing this, but that does not mean it has not happened. It would depend on the extent of things and what had occurred.

There have been instances where someone who has gone bankrupt did end up in criminal court, but not because they went bankrupt. It was due to the fact they refused to abide by the restriction of bankruptcy, or deliberately hid assets and lied to a judge.

Still, why even get mixed up on something like this if you don’t have to, and you don’t have to.

One person who we had spoken with years ago had mentioned they had transferred a car over to their son prior to going bankrupt.

The Receiver took note of this and issued the person with a BRO for eight (8) years.

Seemed like an odd amount of time, eight years, and also a bit harsh, but then again, we may not have been told all the details of the transfer.

So I suppose the word here from all this is to not transfer or sell assets prior 
to going bankrupt, and if you do make the decision to do this, be aware of 
the ramifications of such a move.

Is not disclosing an asset or not answering all the questions asked in 
bankruptcy fraud, yep, it is.

And again, why even begin to think about or do this.

If you have assets that you need to protect you may want to look at other options besides going bankrupt, possibly a Debt Management Plan or an IVA. While they may take you a little bit longer to be debt free, at least you are not committing fraud and all the implications of doing so.

In addition, IVA’s are in place to aid those who are insolvent, but wish to preserve a property.

And one question that has been asked a lot is, how will they find out??? First, who is they?? The courts, the Receiver, etc.

In being less than truthful in your bankruptcy there are a variety of ways this may be discovered. It may be through the requesting of documents to prove an expense or something you have written down on your bankruptcy forms; if you cannot show this, it can cause the Official Receiver to look even deeper into your bankruptcy and situation.

There are also land records, records through the DVLA, etc; paper trails can be found.

So the best advice would be to be as truthful and honest as you can in completing the bankruptcy forms and discussions with the OR.

Travelling if Bankrupt or in an IVA

Can I Travel Whilst Bankrupt or in an IVA?

Will bankruptcy affect my obtaining a Visa to move to another country?

If I am bankrupt do I have to surrender my Passport?

I am sponsoring my spouse to move here from abroad, will my bankruptcy impact this?

These are questions that are asked on a very regular basis and are a genuine concern for many people.

As the world has gotten smaller, we are all moving about a bit more, living in other countries, taking holidays here and there, and with this travel and lifestyle, comes the need for Passports, security issues, and Visa’s and work permits to be able to live and work abroad.

So how does bankruptcy and being bankrupt fit into all this modern day living?

It fits just fine, and I’ll explain.

There are no travel restrictions whilst you are bankrupt or in an IVA or 
afterwards, when your bankruptcy has been discharged, so you are free to 
travel about for holidays, work, or if you wanted to move to another country. 
And you do not surrender your passport in bankruptcy.

Moving to another country while bankrupt or even not being bankrupt, 
brings up a different set of questions and issues.

First, you do need to inform the Official Receiver of your move if you are still bankrupt; not that they can or would stop you from moving, you just need to inform them.

Now if you are moving to any EU countries, then you are OK to do so as the UK is a part of the EU; however to move to other countries it may require you obtain a Visa to go and live there.

So does bankruptcy affect your obtaining a Visa to move to another country??

From what we know, it does not. But with Immigration laws changing as we speak, it is always best to confirm this though Immigration, or who is sponsoring you for the Visa.

But for the majority of countries, it should not be an issue. Sometimes when getting a Visa to another country you need to show you can afford to support yourself, usually just by having a job lined up this is sufficient to meet this requirement.

But in mentioning sponsoring or being being sponsored to get a Visa, it does raise the question of being bankrupt and bring someone to the UK, sponsoring them to live here; usually as a spouse.

This needs to be confirmed through Immigration, as each person’s set of circumstances can be different and there are different requirements for different Visa’s, but we have had clients who have gone bankrupt, and by them being insolvent, it did impact them bring a partner or spouse into the UK.

The logic or thinking was that if you cannot support yourself, how can you support someone else as well? Tough thinking, but with unemployment as high as it is, there are immigrants here that cannot or are not allowed to work for a period of time, and they cannot just move here and receive benefits.

So the person sponsoring them would need to show or pass a financial test.

Again, the Immigration laws are changing and it is best to get your particular circumstance looked at by the Home Office’s Border Agency.

But for the majority of us, bankruptcy need not be a hindrance to travelling about.

In addition, you can even go bankrupt, and enter into an IVA from abroad. However, there are some restrictions, and issues than can arise.

Bankruptcy and IVA’s Whilst Living Abroad
Living abroad while bankrupt or on an IVA

Going bankrupt in the UK whilst living abroad can be dome, however, there are a few restrictions regarding this. The same can be said of an IVA.

Bankruptcy From Abroad:

  • If you reside in an EU country, you can only be outside the UK for a period of three (3) months.
  • Your debts can be based in the UK, and EU, and even other non-EU countries, however, the UK bankruptcy protection is only in the UK, and for now the EU. If you include non-EU/UK debts, that country can chase you for payment should you return to that country.
  • If you move outside the UK to a non-EU country, you can go bankrupt from outside the UK, and you have a three (3) year window of time to do this. In addition, you can have a representative handle the bankruptcy for you.

After the 3 years, you can still go bankrupt in the UK, however, you will need to return to do this on your own.

IVA’s From Abroad:

While it is possible to do an IVA whilst living abroad, not all IP’s will do this.

There are practical considerations in doing an IVA from outside the UK, such as money transfers for payments, currency exchange rates, etc.

Eligibility and qualifying for an IVA, even while living outside the UK, is the same as if one lived in the UK.

Having a Bank Account in Bankruptcy

How Do I Handle My Personal Finances Whilst Bankrupt?

A few questions that come up a lot once someone has been made bankrupt is how do I pay my bills?

How can I bank?

What about my wages or benefits, how can I still get paid or receive these?

What about my the other accounts I have, and any joint chequing accounts with my spouse/partner?

Once you are made bankrupt, basically your finance come under the scrutiny of the Official Receiver, meaning they need to know all your monthly expenses and your income/wages/benefits, and approve all the expenses you have each month.

Once this has been viewed and approved you go about living your life, and 
after 12 months your bankruptcy will be discharged, or over, and you no 
longer are under the restrictions of bankruptcy.

However, during the time of your bankruptcy, until you are discharged, you 
are obligated to report any changes in your finances and your status to the 
Official Receiver.

So once bankrupt, how do you get by and pay your bills and live and handle your finances.

Once the Official Receiver has reviewed your forms and noted all the bank accounts you have, they will notify those banks to freeze the accounts. Some banks if you owe them money, once they are notified of your bankruptcy, will freeze any account you have with them to access or take any money you may have in the account.

This the bank/creditors right to offset the loss they may incur from your going bankrupt and owing them money.

So, the OR notifies any bank you have an account with and it is frozen, so how do you bank whilst bankrupt?

You are allowed a basic account whilst bankrupt, and you can have this in place prior to going bankrupt. If it is frozen by the OR, they will un-freeze it once they are aware it is a basic account; also during this time the bank is to continue to pay your priority bills you may have being paid out of this account.

So you are allowed a basic account that can have your wages, benefits, etc paid into and your direct debits and standing orders paid out of.

Of course who to open this account with, what banks will do this for you?

In the past only a couple of banks would allow a bankrupt a basic account. Many banks have their own rules and regulations about who they will grant an account to. In addition, the banks were concerned over the laws regarding banking and bank accounts.

Banks had concerns over being held liable for an account holder’s actions if they went bankrupt. However, there were changes implemented so banks would be protected by any recovery action by Trustees, this allowing more banks to grant accounts to those that are bankrupt or have gone bankrupt.

So you are allowed a basic bank account whilst bankrupt, and opening one prior to going bankrupt is advisable.

Hiding Assets If You Are Insolvent

If you find yourself struggling with bills and debt, or even possibly if you are going through a bad breakup in a relationship or a divorce, something that everyone is concerned about is, what happens to my stuff; my possessions, my property, my car, my jewellery, my valuables.

It is a natural reaction to the stress of the situation. You have acquired possessions or property over the years and you wish to keep them if possible.

And two areas that can really bring this to light are divorce and insolvency.

Unless there is a solid prenuptial agreement, for both these situations, the outcome may be less than ideal.

Divorce

Hiding assets in a divorce situation is a no-no, however, people still try to do it.

Divorces can get nasty, and assets in a divorce can be divided in one of two
ways, either the couple mutual decides who is to get what, or the courts will 
do it for you.

And if the courts make the decision, it may not be the way you would have
liked things to have been divided.

Just consider the “Hildebrand Rules”. This is where the courts said it was OK for one spouse to copy documents that belonged to the other spouse in order to show they were hiding assets in the divorce. As long as the documents were just copied and returned, there was no harm.

A few things do need to be pointed out about assets and divorce:

  • You do need to disclose the assets when asked.
  • Transferring an asset or starting a new company if a business owner is still wrong.
  • Don’t have any secret bank accounts.
  • Cooperate with your spouses attorney or solicitor, if you don’t they may feel you are hiding something.
  • Remember, even if you do get away with hiding an asset, it may be found out at a later date.

Insolvency

When someone is insolvent this means their liabilities exceed their assets.

You cannot afford to pay back the debts and accounts you have, and you are insolvent.

Insolvency can force a person into bankruptcy or possibly an IVA/Individual Voluntary Arrangement. As we have mentioned and discussed, both bankruptcy and IVA’s are forms of insolvency.

If you have assets, such as expensive cars, property, valuable antiques, or anything else of value, these assets could possibly be taken from you to repay the debts/accounts.

So people try to hide them.

What assets do people try to hide:

  • Money
  • Property
  • Cars
  • Anything of value that might be taken

IVA’s: One of the strongest reasons why someone may enter into an IVA if they are insolvent, is to avoid bankruptcy, and also to keep an asset such as a property. If their property has value or equity, in bankruptcy they may lose it.  In an IVA they may just be required to release a portion of the equity at the end of the IVA.

One very important point needs to be made here, if your assets exceed your liabilities, you are not insolvent.

If you have £20,000 worth of debt, and £50,000 worth of equity in a property, you are not insolvent, and would not be able to do an IVA.  You would be told to sell the property and pay your debts in full.

In some instances a person may try to hide an asset.  There are penalties if this is found out.  As to how it may be found out, there are many ways.  So best not to try and chance it.

Bankruptcy:  In bankruptcy an Official Receiver is appointed to review your bankruptcy forms, interview you, and see if there are any assets that can be liquidated to have money paid into the bankruptcy to be distributed to your creditors.

If you have property with or without equity, it can be an issue. More so if you have equity.

So what do people do to avoid losing their property or other assets, hide them.

One of the more popular ways this hiding an asset is done is to transfer the assets to another person, perhaps a family member.

If this transfer is found out, the OR may issue a BRO/Bankruptcy Restriction Order against the person who has gone bankrupt, and chase the recipient of the property to get it back.

The restriction order keeps the person who went bankrupt under the restrictions of bankruptcy longer than the usual 12 months, for up to 15 years.

In chasing the family member for the assets, here’s where it gets ugly.

If the family member refuses or cannot give the asset back to the OR, the OR can bring bankruptcy proceedings against the family member.

Not a good thing.

A good piece of advice is to never transfer or sell anything of value prior to going bankrupt.

And as we have already discussed, with Section 333 of the Insolvency Act, even after being discharged from bankruptcy, if you have hidden any assets, or done anything that is “less than proper”, there can be implications.

So it would seem the long arm of the Official Receiver reaches further than one might imagine, and hiding assets may be found out at a later date.

Bankruptcy and IVA FAQ’s
Top bankruptcy and IVA questions answered

Can I keep my car if I go bankrupt?

In most instances you are allowed a car in bankruptcy and also in an IVA. There will be a couple of points that will be looked at.

  • If the car is on finance, how much is the monthly payment?
  • Do you need a car?
  • What is the valuation of the car?

You are allowed a car in bankruptcy and in an IVA if you can show a need for one, and the car is of modest value.

Modest value can be a vehicle considered worth less than £2,000, but this is flexible.

Also, showing a need for the car. Do you need it to get to work, as there is no public transport, or do you need the vehicle for family or medical reasons.

If there is financing on the car, how much is the monthly payment, and the monthly costs associated with having the car. If the monthly payment is high, or the operating costs are high, and they are cheaper ways to get about, you may be required to give the car back to free-up some money to pay into the bankruptcy.

You also need to be aware that if there is financing on the car, how does the lender or finance company feel about your bankruptcy. In most instances as long as you are still paying the payments, they will be fine with it.

Lastly, what is the value of the car. The OR is not going to let you as a bankrupt be driving about in a £10,000 car, or some fancy collectible motor.

If you enter into an IVA, much of the same can be said as if in bankruptcy.

If there is a high monthly finance payment, or if there is no need for a car, and not having one would free-up money to pay into the IVA without causing a hardship, you could be requested to not have the car and the expense associated with the car.

My partner/spouse is going bankrupt, will it affect me?

In most instances you are allowed a car in bankruptcy and also in an IVA. There will be a couple of points that will be looked at.

  • If the car is on finance, how much is the monthly payment?
  • Do you need a car?
  • What is the valuation of the car?

You are allowed a car in bankruptcy and in an IVA if you can show a need for one, and the car is of modest value.

Modest value can be a vehicle considered worth less than £2,000, but this is flexible.

Also, showing a need for the car. Do you need it to get to work, as there is no public transport, or do you need the vehicle for family or medical reasons.

If there is financing on the car, how much is the monthly payment, and the monthly costs associated with having the car. If the monthly payment is high, or the operating costs are high, and they are cheaper ways to get about, you may be required to give the car back to free-up some money to pay into the bankruptcy.

You also need to be aware that if there is financing on the car, how does the lender or finance company feel about your bankruptcy. In most instances as long as you are still paying the payments, they will be fine with it.

Lastly, what is the value of the car. The OR is not going to let you as a bankrupt be driving about in a £10,000 car, or some fancy collectible motor.

If you enter into an IVA, much of the same can be said as if in bankruptcy.

If there is a high monthly finance payment, or if there is no need for a car, and not having one would free-up money to pay into the IVA without causing a hardship, you could be requested to not have the car and the expense associated with the car.

My partner and I bought a property together and they are going bankrupt, will we lose the house?

In most instances you are allowed a car in bankruptcy and also in an IVA. There will be a couple of points that will be looked at.

  • If the car is on finance, how much is the monthly payment?
  • Do you need a car?
  • What is the valuation of the car?

You are allowed a car in bankruptcy and in an IVA if you can show a need for one, and the car is of modest value.

Modest value can be a vehicle considered worth less than £2,000, but this is flexible.

Also, showing a need for the car. Do you need it to get to work, as there is no public transport, or do you need the vehicle for family or medical reasons.

If there is financing on the car, how much is the monthly payment, and the monthly costs associated with having the car. If the monthly payment is high, or the operating costs are high, and they are cheaper ways to get about, you may be required to give the car back to free-up some money to pay into the bankruptcy.

You also need to be aware that if there is financing on the car, how does the lender or finance company feel about your bankruptcy. In most instances as long as you are still paying the payments, they will be fine with it.

Lastly, what is the value of the car. The OR is not going to let you as a bankrupt be driving about in a £10,000 car, or some fancy collectible motor.

If you enter into an IVA, much of the same can be said as if in bankruptcy.

If there is a high monthly finance payment, or if there is no need for a car, and not having one would free-up money to pay into the IVA without causing a hardship, you could be requested to not have the car and the expense associated with the car.

What is “beneficial interest?”

In most instances you are allowed a car in bankruptcy and also in an IVA. There will be a couple of points that will be looked at.

  • If the car is on finance, how much is the monthly payment?
  • Do you need a car?
  • What is the valuation of the car?

You are allowed a car in bankruptcy and in an IVA if you can show a need for one, and the car is of modest value.

Modest value can be a vehicle considered worth less than £2,000, but this is flexible.

Also, showing a need for the car. Do you need it to get to work, as there is no public transport, or do you need the vehicle for family or medical reasons.

If there is financing on the car, how much is the monthly payment, and the monthly costs associated with having the car. If the monthly payment is high, or the operating costs are high, and they are cheaper ways to get about, you may be required to give the car back to free-up some money to pay into the bankruptcy.

You also need to be aware that if there is financing on the car, how does the lender or finance company feel about your bankruptcy. In most instances as long as you are still paying the payments, they will be fine with it.

Lastly, what is the value of the car. The OR is not going to let you as a bankrupt be driving about in a £10,000 car, or some fancy collectible motor.

If you enter into an IVA, much of the same can be said as if in bankruptcy.

If there is a high monthly finance payment, or if there is no need for a car, and not having one would free-up money to pay into the IVA without causing a hardship, you could be requested to not have the car and the expense associated with the car.

I co-signed for my ex-partner to get approved for a loan and now they are going bankrupt/entering into an IVA. Am I liable now for that loan?

In most instances you are allowed a car in bankruptcy and also in an IVA. There will be a couple of points that will be looked at.

  • If the car is on finance, how much is the monthly payment?
  • Do you need a car?
  • What is the valuation of the car?

You are allowed a car in bankruptcy and in an IVA if you can show a need for one, and the car is of modest value.

Modest value can be a vehicle considered worth less than £2,000, but this is flexible.

Also, showing a need for the car. Do you need it to get to work, as there is no public transport, or do you need the vehicle for family or medical reasons.

If there is financing on the car, how much is the monthly payment, and the monthly costs associated with having the car. If the monthly payment is high, or the operating costs are high, and they are cheaper ways to get about, you may be required to give the car back to free-up some money to pay into the bankruptcy.

You also need to be aware that if there is financing on the car, how does the lender or finance company feel about your bankruptcy. In most instances as long as you are still paying the payments, they will be fine with it.

Lastly, what is the value of the car. The OR is not going to let you as a bankrupt be driving about in a £10,000 car, or some fancy collectible motor.

If you enter into an IVA, much of the same can be said as if in bankruptcy.

If there is a high monthly finance payment, or if there is no need for a car, and not having one would free-up money to pay into the IVA without causing a hardship, you could be requested to not have the car and the expense associated with the car.

I have a van, tools and other work materials that are worth thousands of pounds, will I lose them in bankruptcy?

In most instances you are allowed a car in bankruptcy and also in an IVA. There will be a couple of points that will be looked at.

  • If the car is on finance, how much is the monthly payment?
  • Do you need a car?
  • What is the valuation of the car?

You are allowed a car in bankruptcy and in an IVA if you can show a need for one, and the car is of modest value.

Modest value can be a vehicle considered worth less than £2,000, but this is flexible.

Also, showing a need for the car. Do you need it to get to work, as there is no public transport, or do you need the vehicle for family or medical reasons.

If there is financing on the car, how much is the monthly payment, and the monthly costs associated with having the car. If the monthly payment is high, or the operating costs are high, and they are cheaper ways to get about, you may be required to give the car back to free-up some money to pay into the bankruptcy.

You also need to be aware that if there is financing on the car, how does the lender or finance company feel about your bankruptcy. In most instances as long as you are still paying the payments, they will be fine with it.

Lastly, what is the value of the car. The OR is not going to let you as a bankrupt be driving about in a £10,000 car, or some fancy collectible motor.

If you enter into an IVA, much of the same can be said as if in bankruptcy.

If there is a high monthly finance payment, or if there is no need for a car, and not having one would free-up money to pay into the IVA without causing a hardship, you could be requested to not have the car and the expense associated with the car.

What happens if I do an IVA and cannot pay the monthly payments?

In most instances you are allowed a car in bankruptcy and also in an IVA. There will be a couple of points that will be looked at.

  • If the car is on finance, how much is the monthly payment?
  • Do you need a car?
  • What is the valuation of the car?

You are allowed a car in bankruptcy and in an IVA if you can show a need for one, and the car is of modest value.

Modest value can be a vehicle considered worth less than £2,000, but this is flexible.

Also, showing a need for the car. Do you need it to get to work, as there is no public transport, or do you need the vehicle for family or medical reasons.

If there is financing on the car, how much is the monthly payment, and the monthly costs associated with having the car. If the monthly payment is high, or the operating costs are high, and they are cheaper ways to get about, you may be required to give the car back to free-up some money to pay into the bankruptcy.

You also need to be aware that if there is financing on the car, how does the lender or finance company feel about your bankruptcy. In most instances as long as you are still paying the payments, they will be fine with it.

Lastly, what is the value of the car. The OR is not going to let you as a bankrupt be driving about in a £10,000 car, or some fancy collectible motor.

If you enter into an IVA, much of the same can be said as if in bankruptcy.

If there is a high monthly finance payment, or if there is no need for a car, and not having one would free-up money to pay into the IVA without causing a hardship, you could be requested to not have the car and the expense associated with the car.

I have gone bankrupt, can I travel to other countries?

In most instances you are allowed a car in bankruptcy and also in an IVA. There will be a couple of points that will be looked at.

  • If the car is on finance, how much is the monthly payment?
  • Do you need a car?
  • What is the valuation of the car?

You are allowed a car in bankruptcy and in an IVA if you can show a need for one, and the car is of modest value.

Modest value can be a vehicle considered worth less than £2,000, but this is flexible.

Also, showing a need for the car. Do you need it to get to work, as there is no public transport, or do you need the vehicle for family or medical reasons.

If there is financing on the car, how much is the monthly payment, and the monthly costs associated with having the car. If the monthly payment is high, or the operating costs are high, and they are cheaper ways to get about, you may be required to give the car back to free-up some money to pay into the bankruptcy.

You also need to be aware that if there is financing on the car, how does the lender or finance company feel about your bankruptcy. In most instances as long as you are still paying the payments, they will be fine with it.

Lastly, what is the value of the car. The OR is not going to let you as a bankrupt be driving about in a £10,000 car, or some fancy collectible motor.

If you enter into an IVA, much of the same can be said as if in bankruptcy.

If there is a high monthly finance payment, or if there is no need for a car, and not having one would free-up money to pay into the IVA without causing a hardship, you could be requested to not have the car and the expense associated with the car.

I am in an IVA and I want to by a property, can I, and will I be approved for a mortgage?

In most instances you are allowed a car in bankruptcy and also in an IVA. There will be a couple of points that will be looked at.

  • If the car is on finance, how much is the monthly payment?
  • Do you need a car?
  • What is the valuation of the car?

You are allowed a car in bankruptcy and in an IVA if you can show a need for one, and the car is of modest value.

Modest value can be a vehicle considered worth less than £2,000, but this is flexible.

Also, showing a need for the car. Do you need it to get to work, as there is no public transport, or do you need the vehicle for family or medical reasons.

If there is financing on the car, how much is the monthly payment, and the monthly costs associated with having the car. If the monthly payment is high, or the operating costs are high, and they are cheaper ways to get about, you may be required to give the car back to free-up some money to pay into the bankruptcy.

You also need to be aware that if there is financing on the car, how does the lender or finance company feel about your bankruptcy. In most instances as long as you are still paying the payments, they will be fine with it.

Lastly, what is the value of the car. The OR is not going to let you as a bankrupt be driving about in a £10,000 car, or some fancy collectible motor.

If you enter into an IVA, much of the same can be said as if in bankruptcy.

If there is a high monthly finance payment, or if there is no need for a car, and not having one would free-up money to pay into the IVA without causing a hardship, you could be requested to not have the car and the expense associated with the car.

How long will bankruptcy or an IVA stay on my credit history?

In most instances you are allowed a car in bankruptcy and also in an IVA. There will be a couple of points that will be looked at.

  • If the car is on finance, how much is the monthly payment?
  • Do you need a car?
  • What is the valuation of the car?

You are allowed a car in bankruptcy and in an IVA if you can show a need for one, and the car is of modest value.

Modest value can be a vehicle considered worth less than £2,000, but this is flexible.

Also, showing a need for the car. Do you need it to get to work, as there is no public transport, or do you need the vehicle for family or medical reasons.

If there is financing on the car, how much is the monthly payment, and the monthly costs associated with having the car. If the monthly payment is high, or the operating costs are high, and they are cheaper ways to get about, you may be required to give the car back to free-up some money to pay into the bankruptcy.

You also need to be aware that if there is financing on the car, how does the lender or finance company feel about your bankruptcy. In most instances as long as you are still paying the payments, they will be fine with it.

Lastly, what is the value of the car. The OR is not going to let you as a bankrupt be driving about in a £10,000 car, or some fancy collectible motor.

If you enter into an IVA, much of the same can be said as if in bankruptcy.

If there is a high monthly finance payment, or if there is no need for a car, and not having one would free-up money to pay into the IVA without causing a hardship, you could be requested to not have the car and the expense associated with the car.

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