Author Topic: Bankruptcy questions. Help appreciated  (Read 6270 times)

JohnDoe

  • *
  • Posts: 6
Bankruptcy questions. Help appreciated
« on: Feb 28, 2011, 10:47:57 AM »
After a number of years of trying to save myself i am now considering going bankrupt. If any  one can answer the following questions it would be appreciated :-
 
1. Will it complicate matters if my Tax and VAT returns are estimates? My accountant tells me everything must be actual. I'm unclear if he is saying this to get himself an extra 2k for the remaining paperwork!
 
2. The inland revenue are threatening forcing me bankrupt, is this ok or should i seek advice and am better if i declare bankrupt myself?
 
3. I currently live in my Grand parents home for free with the idea of buying the house when i got my affairs sorted. This is now not likely so the current position will change and i will either have to move out or get a rental agreement sorted out with my mother (who owns the house). A complicated one and i am worried this could end up involving my parents with a Tax enquiry or something if we suddenly set up a rental?
 
4. I may well close my business and take a job. What payment are taken into account for an IPA? If i use my own vehicle on a milage scheme would this include as income? Would job completion bonuses be included? Overtime?
 
Personal circumstances.
I am a sole trader with total debts of £60,000. This includes £15,000 of unsecured loans and the rest owing to the IR and C&E. My partner is dependent on me as is her daughter (now 27).

James Falla

  • Hero Member
  • *****
  • Posts: 655
Re: Bankruptcy questions. Help appreciated
« Reply #1 on: Feb 28, 2011, 04:14:50 PM »
Hi there JohnDoe
 
The answers to your questions are as follows:
 
1. The amount you owe HMRC can be estimates. At the end of the day, any unsecured debt that is outstanding at the time you declare yourself bankrupt will be included in the bankrupty. As such, if HMRC are able to prove to the OR that you have underestimated the amount you owe them, this will make no difference to you. The additional debt will simply be added and subsequently written off after your discharge.
 
2. This will really depend on your circumstances. If you were are a home owner, it might be best for you to control the situation and declare bankruptcy yourself. However, given you have little or no assets, then there will be little difference if HMRC make you bankrupt and you could save yourself the £600 fee. However a threat is very different than real action and it could take HMRC a long time to get round to it. So if you want to get things done and dusted asap, best make yourself bankrupt.
 
3. Why would setting up a rent agreement give you a tax problem? A home owner is within their rights to let you live in the property rent free and then change their mind and start charging you rent. It is their right to do so if they wish.
 
4. An income payment order wil be based on your disposable income. You would not include a milage allowance in your income calculation as this is an expense to pay for the business miles you do in your vehicle. While you are bankrupt, you do have to keep the OR informed of extra money you earn such as overtime and bonuses.
 
Hope this helps.
 
Debt Expert & Author
beatmydebt.com

JohnDoe

  • *
  • Posts: 6
Re: Bankruptcy questions. Help appreciated
« Reply #2 on: Mar 01, 2011, 01:07:45 PM »
James, many thanks tfor the advice.The tax problem i mentioned with the house was one to my parents rather than myself.If an IPA is set up and i was discharged after 12 months the payments continue for a further 2 years. .Is the OR involved during this 2 year period and payments be revised during this period?

James Falla

  • Hero Member
  • *****
  • Posts: 655
Re: Bankruptcy questions. Help appreciated
« Reply #3 on: Mar 01, 2011, 02:44:33 PM »
No problem JohnDoe
 
If an IPA is set up, then the OR will supervise it for its duration. At any time while it is in place, if your financial circumstances change, you must inform the OR and they can increase or decrease your monthly payment accordingly. If an IPA is put in place, this will often continue after you have been discharged from your bankrupty
Debt Expert & Author
beatmydebt.com

JohnDoe

  • *
  • Posts: 6
Re: Bankruptcy questions. Help appreciated
« Reply #4 on: Mar 02, 2011, 12:32:24 PM »
If thereWould an IPA be likely to run for over 3 years? Or is 3 years the maximum?If i allow the HMRC to force bankruptcy will be advised a date etc or will a big bunch just suddenly turn up at my door?

James Falla

  • Hero Member
  • *****
  • Posts: 655
Re: Bankruptcy questions. Help appreciated
« Reply #5 on: Mar 03, 2011, 02:56:24 PM »
Yes, an IPA normally lasts for three years maximum. It would be very unusual for this to be extended by the OR. If HMRC or any other creditor wants to petition for your bankruptcy there will have to be a court hearing. You would be advised of this and I would suggest that you attend.
Debt Expert & Author
beatmydebt.com

JohnDoe

  • *
  • Posts: 6
Re: Bankruptcy questions. Help appreciated
« Reply #6 on: Mar 03, 2011, 03:20:40 PM »
Thanks again James, its all a big help to me. Sadly my head is full of questions, sorry to keep asking them but i have a lot to work out  :(
 
1. If i continue trading with my business (my accountant assures me my business is profitable and is advising against bankruptcy), would i need to advise my customers and open a seperate personal bank account to receive payment? Can BACS be paid into a basic bank account? Would public liability insurance be an issue with me being bankrupt? Would i expect to face other problems because of being bankrupt?
 
2. More likely than option 1. i am going to move my customers to another company that i already do work for. Is there any forseeable problems with this option? I would claim a mileage allowance in line with current guidelines and would use my own van and equipment. Is there anything wrong with this?
 
3. My partner and her daughter (27) are both dependant on me financially, would the OR recognise this in any IPA or do i need to kick them out  :D  May as well destroy all areas of my life while i'm at it!

James Falla

  • Hero Member
  • *****
  • Posts: 655
Re: Bankruptcy questions. Help appreciated
« Reply #7 on: Mar 03, 2011, 03:55:14 PM »
No problem JohnDoe
 
Given you are a sole trader, then there is a risk that the bank account you are using now for your business will be closed. As such opening a new account would be a prudent move. BACSs payments can certainly be paid into a basic account. In terms of your public liability insurance, this should not be effected.
 
Going to work for someone else and letting your customers follow you there sounds like a good option. There is absolutely no issue with this as far as I can see. Clearly if your partner is dependant on you then this expenditure will be allowable by the OR. Given that her daughter is 27 years old, there will be questions as to why she is unable to support herself or at least contribute to the household income. However as long as these can be sensibly answered, you should have no problems.
Debt Expert & Author
beatmydebt.com

JohnDoe

  • *
  • Posts: 6
Re: Bankruptcy questions. Help appreciated
« Reply #8 on: Mar 12, 2011, 02:24:44 AM »
More questions, starting to feel that the end is nearing!
 
1. HMRC estimates of liabilities? Will the OR bring any info required up to date, is this necessary? Is there a risk that i could be persued afterwards for monies owing because i hadn't submitted all the paperwork?
 
2. Previously James mentioned that a threat is different to taking action and it may take a long time for the HMRC to petition for bankrupty. I have been served with a statutory demand under section 268 of the insolvency act 1986. This details they will petition for backruptcy after 21 days. Is this the correct act etc and does this seem likely they will petition me? This would save me doing it myself!
 
3. If i open a basic personal account prior to bankruptcy will it be closed with my business and joint current account when my assets are seized? Do i have to wait until after the event to open an account? Its likely i am closing my business and taking a job with a company then moving my customers over where possible so my business account wont be required.
 
4. Am i correct in assuming that if i am discharged from bankruptcy without an IPA in place then an IPA cannot be set up after discharge? I am struggling to get a decent salary as the companies i am talking to take the bankrupcy as an indication that the business as failed financially rather than what actually happened which was my lack of skill controlling finances and my failure to complete paperwork correctly.
 
2.30am and i am sat here thinking through this stuff  :(

James Falla

  • Hero Member
  • *****
  • Posts: 655
Re: Bankruptcy questions. Help appreciated
« Reply #9 on: Mar 14, 2011, 12:22:40 PM »
Hi there JohnDoe
 
To answer your questions:
 
1. The OR will contact HMRC and ask them for a proof of debt. HMRC will then submit the statements of what they believe is owed. After this, they can not then come back at a later date and argue that more was owed.
 
However, remember, if you continue with your business, you will continue to accrue income tax debt and you must account for that correctly and ensure it is paid on time from now on.
 
2. If you have been issued with a Statutory Demand, then this will pave the way for HMRC to petition for your bankruptcy and I think at this stage it is likely that they would do so. If you are hoping that they will, I would wait the 21 days and see what happens.
 
3. You can open a new personal account before the event and it should not be closed. Just tell the bank that it is likely that you wil declare bankrupty shortly and make sure thay will be OK for you to continue to have the account after the event.
 
4. Correct, if you are discharged and no IPA has been set up, then the OR no longer has the opportunity to do this. As such, they will generally ask you to confirm whether your circumstances have changed just before they discharge you. If they have, then you can expect an IPA. Remember any disposable income over £20 a month is now concidered fair game by the OR.
Debt Expert & Author
beatmydebt.com

JohnDoe

  • *
  • Posts: 6
Re: Bankruptcy questions. Help appreciated
« Reply #10 on: Jul 05, 2011, 08:14:07 AM »
Many thanks with all the help with this so far James.
Nothing has happened since, but i am now in a position to close down my business and have the option to start a paid job with a company.
If i apply for banruptcy myself what is involved? How does the process work? I make an appointment at my local magistrates court and get a date for a meeting or hearing? At this date am i declared bankrupt or is this at a future date so that everyone invloved can be contacted? Just trying to work out the process so i don't get any unexpected shocks! The £400 cost wont be a problem for me to scrap together.

James Falla

  • Hero Member
  • *****
  • Posts: 655
Re: Bankruptcy questions. Help appreciated
« Reply #11 on: Jul 07, 2011, 11:14:07 AM »
Hi there Johndoe
 
Appologies for the delay in getting back to you. I do not look at this forum every day :) Applying to declare yourself bankrupt is a relatively simple process once the decision has been made to do so. You have to complete an application form and then present this at your local county court (or the Royal Courts of Justice in the Strand if you live in London).
 
Unfortunately the cost of bankruptcy at the court has risen twice since April this year. I now stands at £700 in total.
Debt Expert & Author
beatmydebt.com