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Topic starter
11/05/2020 6:55 pm
I am reading this forum for some time now and considering my options. I did an assessment with StepChange and they say I qualify for Bankruptcy, what I am about to apply for, but I do have some doubts. I know this forum is mainly for trust deed doubts, but if someone can help me with those sequestration doubts it would be really appreciated.
Just so you have a background, I live in Scotland, I have around £15K in debts and after my living expenses, I don't have any spare income. I am studying at the moment, what won't leave me more time for doing more work than what I am already doing and I am a lone parent as well. I don't own a house or any assets, just my car that value less than 2K. I don't see my situation changing in the next 4 years since I need to finish university before I can work more hours and get a better job.
My first doubt is, even though in the last 2 months my self-employment business was affected by the coronavirus situation, I received my Universal Credit payment increased, which allowed me to pay for my basic bills. But now it seems that I will receive also the self-employed grant. It is not a lot of money, but as I had cut expenses in those months due to self-isolation and had the UC increased, I was able to cover the basic bills before receiving this grant.
So I was thinking using this grant money to pay off some priority debts, like my car, because my car is on hire purchase, I already paid half of it, and the contract has a clause saying that if I go bankruptcy they may take the car back. I cannot lose the car because I use it for work so I though on paying the balance before going bankrupt since that became an option because of this grant. I also thought about paying back a small loan I took from a relative, and pay for 1 year in advance of my son tutor.
My question is, would those payments made prior the bankruptcy be a problem? And if so, what may happen?
Also, what other things may be a problem on the bankruptcy process that I may be not aware? I read that when you go bankrupt they look at you past transactions for the past 5 years, what they look?
And finally, what is the worst thing that may happen, when you go bankrupt?
12/05/2020 9:43 am
Welcome to the forum Tom1234.
As you've already identified that you're insolvent, you'll need to be cautious about how you spend any lump sum you receive.
There's no issue with using a lump sum like this to cover basic living costs. If you start to repay some creditors, but not others, this could cause you issues further down the line when a trustee reviews your prior financial conduct. The same could be the case if you use a significant sum of money on an advance purchase of something that might not be considered to be a basic living cost.
If prior financial conduct is seen as being "dishonest or blameworthy" it could result in a Bankruptcy Restriction Undertaking or Order. These essentially extend the restrictions associated with bankruptcy for a further period of time (up to 15 years in the very most serious of cases).
Your car's value is currently irrelevant because you don't own it while it remains on hire purchase. You'd usually be able to keep a car in bankruptcy so long as you can demonstrate that you have a reasonable need for it. For most people this will not be an issue, but it might be and issue if you were well connected by public transport links to the places you need to go, for example.
Speak to the hire purchase company about their bankruptcy clause. Some don't enforce it, provided that you keep up with the payments.
It's diffcult to say what the worst thing that could happen to you when you become bankrupt. Beyond all the general disadvantages and drawbacks you can read about here and on other websites, it very much comes down to your individual circumstances.
How much is the lump sum you expect to receive?
How much would it cost to clear the hire purchase on your car?
Qualified Debt Adviser & Forum Administrator - Ask me anything about Trust Deeds 
Topic starter
12/05/2020 10:38 am
Hi TDA, thank you for the answer.
the lump sum is around 4k. To clear the hire purchase it would cost me 2k.
12/05/2020 11:48 am
Thanks Tom1234.
I think it's going to be hard for you to make a confident decision without more information from the hire purchase provider.
Will they recover the vehicle if you become bankrupt?
Would they recover the vehicle if you entered a trust deed?
Bankruptcy, from what you've written, appears to be a sensible route to take. The car is obviously a key point for you though. If you could keep the car with a trust deed, but not with bankruptcy, that £4k lump sum might be used to fund a lump sum payment into a trust deed instead (even if you cannot currently afford monthly payments).
Hopefully the hire purchase firm will give you a clear answer that you can use to identify the best way forwards.
Qualified Debt Adviser & Forum Administrator - Ask me anything about Trust Deeds
13/05/2020 11:50 am
It would be up to the Trustee appointed in your bankruptcy to decide whether any transactions that have taken place prior to the bankruptcy are reasonable or not. If the car is vital to you then I think there is potentially a strong argument that it was reasonable to pay off the finance to avoid the risk of the lender taking it away. I would be surprised if a trustee took much of an issue with this. However, there are no guarantees.
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