Going bankrupt can be the best escape from debt, says ex-judge Stephen Gold

Stephen Gold is a retired judge and author who has written two popular series for This is Money about how to be a successful executor.North Dakota write a will which ensures that your last wishes are fulfilled.

In a new four-part guide, he explains what to do if you’re facing bankruptcy and its very serious consequences, and the best ways to free yourself from creditors and pay off your debts.

If you’ve always dreamed of being a member of a local flood defense committee, avoid bankruptcy. The dream will be frustrated for at least a year.

Otherwise, bankruptcy may be your salvation. An end to the endless stream of threatening letters, county court claim forms and bailiffs at the door.

People no longer shy away from or avoid bankrupts or point them out on the street. Bankruptcy is no longer the stigma it once was.

The ways you could go bankrupt

If you are overwhelmed with debt, there is a chance that one of your creditors will eventually ask the court to declare you bankrupt.

There are several ways to challenge this, if you object to what they are doing.

Additionally, no creditor can start bankruptcy proceedings against you unless you owe them at least £5,000.

The figure used to be £750 and not all creditors have noticed the change.

Given the £5,000 rule, some clever people who have notes under their beds will pay off every debt in full except £4,999.99.

However, it is possible for a creditor who is owed less than £5,000 to collude with other creditors, so that they are owed at least the minimum amount between them, and file jointly for bankruptcy.

But what happens if none of your creditors do the right thing and bankrupt you?

If none of your creditors do the right thing and ruin you, you can embark on a DIY job. Having been bankrupt a couple of times before should not be a legal obstacle.

The procedure now is for you to apply for your own bankruptcy online to the Insolvency Service and in 999 out of 1,000 cases you will not have to appear in court.

However, there is a potential problem. Money. You will have to pay fees of £680.

If a last attempt at the ATM is unsuccessful, you won’t be able to convince anyone to lend you the money (“No, I’m afraid you won’t get it back. I’ll be bankrupt!”) and a charity won’t. help, you can pay in instalments, but you will need to accumulate the total of £680 before the process can formally start.

The £5,000 threshold for a creditor to file for bankruptcy does not apply when you initiate bankruptcy yourself. So, your liabilities must exceed your assets.

If you owe no more than £30,000 then a debt relief order may be suitable for you.

It’s a sort of League Division Two bust with similar results but cheaper, weighing in at £90.

Like bankruptcy, it is obtained through the Insolvency Service and this time through an authorized intermediary, such as Asesoría Ciudadana.

However, it is not available if your assets exceed £2,000, and it does not take into account any cars you own whose value does not exceed £2,000.

And it is also not available if your monthly net income level, after deducting normal household expenses, is more than £75.

Published: Bankruptcy could mean an end to the endless stream of threatening letters, county court claim forms and bailiffs at the door, says Stephen Gold

There are advantages of bankruptcy

Once a year has passed since you filed for bankruptcy, you are usually automatically released from all debts you had previously incurred, and there is nothing creditors can do to try to get their money back in the meantime.

Well, almost all debts.

It does not include any alimony owed to your spouse or common-law partner (current or former); money owed under a court order in a family case where a lump sum or costs must be paid; fines; child support arrears; anything you owe under a court judgment for personal injury damages; and student loans.

Personal pensions are generally safe from creditors, although the situation may not be so simple for some final salary schemes.

This means that you cannot be forced to receive a lump sum under a pension plan for the benefit of creditors. But, if it did, the amount could be taken into account for the purposes of some of those income payment orders or agreements that we discuss below.

Why You May Want to Avoid Bankruptcy

Bankruptcy also has its disadvantages, and not just the ban on being part of a flood defense committee.

If you own something, you will eventually lose it to the extent necessary to pay what you owe.

That includes your interest in a house or flat you live in, if that interest is worth more than £1,000, after your mortgage debt has been deducted from the market value.

But your partner (or your cigar-smoking rich uncle, if you’re lucky enough to have this or any other type of generous benefactor) might be willing to pay the money to settle the creditors’ claim on that interest.

A Debt and Despair Escape Kit: Former Judge Stephen Gold Explains What Happens When You Face Bankruptcy and Want to Pay Off Your Debts

Tools, books, vehicles (although if it’s a Maserati, you may need to replace it with a used Skoda) and other equipment needed for use in your work or business, along with clothing, are also safe from being taken. . bedding, furniture and household goods necessary for the basic household needs of you and your family.

You can wait for a court order to pay income or reach an income payment agreement with the bankruptcy trustee (often the official trustee) who is handling the liquidation of your affairs.

That is where you will have something to spare once the basic living requirements for you and your family have been met.

Through monthly payments, that surplus will be used to pay your debts, but any order or agreement will last only three years.

Other restrictions during the year following bankruptcy are a ban on being a director of a company or taking part in the management of a company without the permission of the court, or taking out credit of £500 or more without disclosing that you are in undischarged bankruptcy. .

In fact, bankruptcy could hinder you from getting credit for a few years. There are lenders who still grant mortgages to ex-bankrupts, although not at the best interest rates in the West.

By the way, if you have been guilty of filing for bankruptcy, the one-year restrictions could be expanded to apply between two and 15 years, even if you have been discharged from bankruptcy and your debts.

Retired judge and writer Stephen Gold

Former judge Stephen Gold is the author of ‘The Return of Breaking Law’ published by Bath Publishing, a complete and irreverent guide to your legal rights and how to win or lose in court.

It’s packed with consumer tips and templates and covers more about bankruptcy as well as a host of other topics, including prenuptial agreements and how to deal with financial disputes after a relationship breaks down.

Where can you look for financial assistance? The ‘Help with fees’ program

This scheme exempts those who are deemed unable to pay from paying all or part of a court fee (and certain court and probate fees).

It is not available if you are filing for your own bankruptcy. If it were, everyone would qualify.

The financial thresholds to qualify for this aid will change on November 27, 2023.

If you want to start a genuine court claim which could generate cash you could use to pay off debts and you hope to take advantage of the scheme, it could be to your advantage or benefit to do so before the changes come into force. advantage of waiting.

Civil court fees for commencing proceedings range from £35 to £10,000, depending on the value of the claim.

You are expected to apply for help at the same time you start the case and not before.

Those who receive benefits will automatically receive help, now and in the future. For the lowest rates of up to £1,250, the amount of savings and investments allowed increases from £3,000 to £4,250.

People aged 66 or over may be eligible for help regardless of the fee amount, as long as their savings and investments do not exceed £16,000. Currently, only people aged 61 or older can benefit in this way.

When your savings and investments are too high, you will be left out of the plan, no matter how low your income is.

If your savings and investments are within the limits, then you have to examine your income and here the thresholds are increasing.

For example, if you are single, you may have a gross monthly income of up to £1,420 (an increase of £250) and qualify.

And, when gross income varies from month to month, you may be able to average the three months before applying for help if that would give you less income than the most recent month.

IN PART TWO… Stephen Gold explains how to avoid your creditors and buy yourself more time to do the honorable thing and pay your debts.