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sd735
Starting Member
2 Posts |
 Posted - 28 December 2009 : 14:54:58
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Hi,
I am just after some information, we are under an IVA and have 2 years left, after struggling for 3 years, however a friend declared herself bankrupt a couple of months ago as decided IVA was not for her.
However, since being declared bankrupt we cannot understand how she is able to afford to buy new things, like a laptop, a new PS3 and go out regularly for meals etc, and also why she does not now have to pay tax on her earnings. Listening to her boast of all these things, and read about it on facebook, makes us feel that maybe we should have taken the brankruptcy route and be done and dusted in 1 year instead of the 5 years for the IVA.
We also cannot understand how she was able to keep all her expensive, TV/DVD set up with surround sound system and her massive collection of DVD's, CD's etc, that she is still adding to even now she is bankrupt.
Can you please advise if this is normal when you have been made bankrupt and if so why when you enter an IVA you are still expected to pay tax on your earnings, this seems a bit unfair. She got herself into the debt through careless spending, but seems to get off very lightly by being bankrupt.
Thank you in advance for your time, if you are able to offer any advice on the above.
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debtinfo
forum expert
2826 Posts |
Posted - 28 December 2009 : 15:23:58
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| As all things there us a grain of trith but will a lot more rubbish wrapped around it and sometimes people exagerate their own situation to keep face. Although everyones situation differs most of the time if your 3/5 the way through your IVA it is best to try and see it through, there a lot of disadvantages to bankruptcy that people tend not to talk about |
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RHB
Senior Member
1159 Posts |
Posted - 28 December 2009 : 15:57:26
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Her non payment of tax should go towards the bankruptcy & if she has spent it, she could find herself in trouble.
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gettingoutofdebt
forum expert
2418 Posts |
Posted - 28 December 2009 : 16:20:26
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Unless the assets (TV, etc.) are currently worth more than about £1k the OR would not be interested in them. The OR also doesn't really check into individual purchases so unless the TV/DVD set up was currently on finance it isn't likely that the OR would be aware of it.
When you are declared BR you normally receive a NT Tax Code, which means you do not pay any income tax on your earning BUT this amount is then reclaimed by the OR and paid towards your creditors. This person should be saving the amount they would normally paid as income tax as the OR will expect it to be paid to them.
If they have more than £99 disposable income after rent, food, etc. then they would pay an Income Payment Order (IPA) but this isn't normally set up until the 3rd month or so of BR. Up until this time they are free to spend (or save) this amount on whatever they like. Once the IPA is set up they will make 36 payments.
In some cases BR is much easier that an IVA. If you have a car less than £2k in value and a property in negative equity (or no property) then BR may be the better option for you.
I originally considered an IVA (and was advised to do an IVA or DMP by an IP) but after researching the differences between an IVA and BR I considered it better/easier to declare BR. This isn't exactly the best moral decision but my only asset is a car worth £1k that I needed for work. I pay an IPA each month but 7 months after declaring BR I am convinced that this was the right decision for me. I have no doubt that at some time in the future (when I want a mortgage, etc.) that declaring BR will come back to bite me but I felt that an IVA was just too strict and not my best option at this time. |
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Skippy
forum expert
United Kingdom
3290 Posts |
Posted - 28 December 2009 : 16:59:54
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Don't forget in BR that you don't pay all of your DI into an IPA and what you do with your share is down to you. My treats to myself have been a meal out now and then and a few CDs.
As Gettingoutofdebt says it also depends on resale value, and something like CDs are worth next to nothing. I must admit I didn't declare my CD collection!
Don't let her boasting get you down - you're over halfway there (well done on that) and you can hold your head high knowing that you have paid back a lot of the money you borrowed.
Good luck for the remaining 2 years, and if you're really struggling please speak to your IP and ask them to vary your payments downwards.
Tomorrow is a mystery, yesterday is history, today is the present, a gift to make the most of.
View my blog at http://skippy13.blogs.bankruptcyhelp.org.uk/
29 IPA payments made, 7 to go - in single figures! |
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sd735
Starting Member
2 Posts |
Posted - 28 December 2009 : 19:01:05
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Thank you all for you input, I understand what you are all saying, and it has made it a bit clearer, but what I cannot understand is why when you go BR you don't have to pay Income Tax and that that money then goes to your creditors.
In my friends case she got herself into debt through nobodies fault but her own, she just didn't know when to stop spending. By going BR her creditors get more or less nothing back, I still cannot understand why being BR means you don't pay Income Tax, why is this ?
Why when you go through an IVA and try and pay as much as possible back to your creditors do you not get the same sort of help ?
Because we only have 2 years left of our IVA we will see it through and that after it is all over we can start a fresh with almost a clear conscience that we paid it all, or most of it back, and we do not intend to go back to the same place we started, but it does make my blood boil a little bit that she seems to be living the life of riley.
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Richard P
Senior Member
United Kingdom
1701 Posts |
Posted - 28 December 2009 : 19:37:02
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HI SD 735
well done on lasting as long as you have with your agreement.
as others have said if you can it is really considered best effort to see the last 2 years through.
No one can comment on your friends situation as we do not know the circumstances.
before you take any action it may be appropriate to discuss with your IVA organsier or one of the experts (mel or Paul) then you can have your own circumstances reviewed and the full consequences of BR compared to IVA.
BOTH have advantages and disadvantages but our own circumstances dictate action
good luck regards Richard |
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debtinfo
forum expert
2826 Posts |
Posted - 28 December 2009 : 19:56:20
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| Hi sd735, it is complicated and to do with all creditors including the HMRC being treated equally in bankruptcy. The person pays the amount they would normally pay to the HMRC to the OR who then pays for the bankruptcy and splits the rest equally amongst all creditors. This only happens for a short period between the bankruptcy order date and the new tax year at which time eveything goes back to normal. |
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Niobe
Administrator
United Kingdom
4590 Posts |
Posted - 28 December 2009 : 20:58:25
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If you are struggling then you should approach your IP in the first instance, especially as you are so far down the line now. If you were to declare BR now, your credit record would be shot for a further 6 years.
The glimmer gets brighter all the time
Jan
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Hi,I am just after some information
