If you have no assets a sensible debt solution to consider is to go bankrupt. However the process can be daunting. Here are some great tips to ensure it goes smoothly.
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- Sell your car before you go bankrupt
- Decide if you will need to change your bank account
- Work out if you will have to make ongoing payments
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Sell your car before you go Bankrupt
You are allowed to keep your car if you go bankrupt as long as you need it for work and other family commitments. However its value must be no more than £1000.
If you do nothing and your vehicle is worth more you will have to sell it. You can then buy an alternative for no more than £1000 but the remaining funds have to be given to the Official Receiver (OR). The only way of keeping the vehicle is if a third party pays the difference to the OR instead.
But, there is an alternative option. You can choose to sell it yourself before you go bankrupt. You can use the proceeds to buy a replacement for £1000 or less. Then in addition, you can also use the cash to put your new vehicle through a full service, pay your application fee and put towards reasonable housekeeping expenses if you need to.
If you sell your vehicle before you go bankrupt you must get a fair market price. Also you must not use the proceeds to pay off anyone you own money to. This would be a preferential payment.
Decide if you will need to change your bank account
You are allowed to have a bank account if you go bankrupt. Your income can be paid into the account and you can maintain all your household bills and other expenses from it.
However if you are using a current account (even if you do not owe the bank any money) this will normally be closed. You will have to open a new basic account to use from now on.
Most high street and and internet based banks now offer basic accounts which are available for bankrupt people. Depending on the bank you chose you may be able to open the new account just before you go bankrupt or have to wait until just afterwards.
If you are already using a basic account with no credit facilities many banks will actually allow you to keep this open. You should double check their policy with them in advance.
Work out if you will have to make ongoing payments towards your debts
When you fill in your Bankruptcy application you will have to give information about your income and expenses. This is used to decide whether you can afford to make ongoing payment towards your debts or not.
You can calculate the amount you might have to pay yourself in advance by completing an income and living expenses budget. Deduct your total expenses from your income to see if you have any disposable income. If so this is what you will have to pay.
If you have no surplus you will not have to pay any more towards towards your debts. Where you do it will have to paid to the official receiver for 3 years.
Even where you have surplus income bankruptcy may still be the best debt solution for you. Give us a call or complete the form below to have a chat and find out.
Arrange a call with a Bankruptcy Expert
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