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Ash
Ash, Solicitor
Category: Law
Satisfied Customers: 10915
Experience:  Solicitor with 5+ years experience
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Hello...I am intending to go bankrupt in approx February next

Customer Question

Hello...I am intending to go bankrupt in approx February next year.I have an internet business and it is the decline in business turnover and family problems and being unable to devote enough time to my business which has accumulated my credit card debts which I have used to support my business stock since the start 6 years ago.they are approx £55000 now. no other debts. I do not own a house and my car is only worth about £2,500. So I do feel that this is the correct course. I shall by Christmas be at a standstill as I cannot increase my credit very much more.
My problem is that as yet I have not touched my pension, and being 67 I know that the OR can insist I draw it...There is a lump sum of £8,300 and weekly sum of between £35 / £65 per week depending how I take it...If I take it now I can probably use most of it before my bankruptcy on household carpets etc which need replacing and decorating. I am a single person, my daughter died three years ago and I now have my 13 year old grandaughter to bring up...hence my reason still to work and need to keep a good home for Saskia.
Questions are.
1. Will the OR frown on my spending my lump sum..(I am already wondering if I should just take the larger pension and no lump sum)?
2.I get full CTC and also some WTC but I am wondering how this will be worked out at the end of the tax year if I do not have accounts for year ending 2013/14, which i won't have as my business year end is April 5th also .I have given an approx profit of £7,500 but it will be less, but I am afraid to ring them to say it will be less and so get it raised, incase I end up owing them and have to pay it off after my bankruptcy.
3. Will my lump sum affect my Tax credits..if so is it best to leave BR until after end of tax year?
4. Once I go bankrupt, what will my tax situation be..I am not a limited company and this year had a tax refund, so as my turover is decreasing I probably won't owe any...except may be on the lump sum...my question is would it be better to take the lump sum before or after April 5th and postpone my BR...

I was hoping not to have to go bankrupt as i wish to begin a new business with Dropshipping (not holding stock) but I doubt I will earn enough, quickly enough to clear the credit card debts. I want to be in a good positon to make Saskia happy, not worrying and working 24/7 as I do at the moment.

I hope once i have gone BR I can take a year off, as all of this is making me ill..I need a break away from so many business thoughts and so many family problems...my grandaughter recently got groomed by an 18 year old lad when she was still only 12, and I had to involve the police. The one good thing is she is now away from him after I managed to get a full bursary grant for her to go to a private all girls boarding school...I love her so much and miss her too...But at least she is getting a good education and I am not having to devote time to her while I get this mess sorted.

I wish to do a marketing/and computer technician course over the next year, to give me a good start after my break..I do feel BR is my only way...If you think not please do tell me...I am hoping that by taking time off work and then only getting my OAP pension, my weekly pension and Saskias allowances I will avoid getting an IPA during my 12 month BR ...

5. Am I right in thinking once I am discharged an IPA can no longer be made?

I did do it once before in 1996. So sorry this is so long...I have manged to read up on almost all aspects..but cannot get answers to these questions...

Thank you so much for reading this mail

Best regards Maggie
Submitted: 3 years ago.
Category: Law
Expert:  Ash replied 3 years ago.

Alex Watts :

Hello my name is Alex and I will help you with this. Please note that I am a working Solicitor and may be on and offline as I have to attend Court and meet with clients, even at weekends. As such you may not get an instant response when you reply as this is not an ‘on demand’ live service, but rest assured I will be giving your question my immediate attention upon return.

Alex Watts :

Have you considered an IVA please?

JACUSTOMER-hgizabd2- :

Hello, Yes i have looked into that...But as I am now 67..68 in Feb...I do not feel that I can guarantee how long I may be able to work and am not earning enough to make payments anyway...

Alex Watts :

1. Will the OR frown on my spending my lump sum..(I am already wondering if I should just take the larger pension and no lump sum)? - If you can show that you currently can not afford to live, it is far better that you use your own assets and take the lump sum, rather than increase what you owe to creditors in terms of credit cards etc. So if you can minimise what you owe to creditors the lump sum to help live would be better.

Alex Watts :

2.I get full CTC and also some WTC but I am wondering how this will be worked out at the end of the tax year if I do not have accounts for year ending 2013/14, which i won't have as my business year end is April 5th also .I have given an approx profit of £7,500 but it will be less, but I am afraid to ring them to say it will be less and so get it raised, incase I end up owing them and have to pay it off after my bankruptcy. - if you owe money to HMRC then it can be included in your bankruptcy. If HMRC end up owing you money the OR is likely to take this to pay off your creditors. But of course you will be left with enough money to live, the OR won't leave you penniless.

Alex Watts :

3. Will my lump sum affect my Tax credits..if so is it best to leave BR until after end of tax year? - You will need to declare the lump sum to HMRC as it may be considered as income. Therefore it could affect your WTC etc. So as you say if you can survive until after 5th April 2014 it may be better for you that way.

Alex Watts :

4. Once I go bankrupt, what will my tax situation be..I am not a limited company and this year had a tax refund, so as my turover is decreasing I probably won't owe any...except may be on the lump sum...my question is would it be better to take the lump sum before or after April 5th and postpone my BR. - Any tax due would be included in bankruptcy and any take refunded would be paid to creditors. It is up to you whether you know if you are likely to make a profit or loss. If it is a profit you would be better off waiting until April 2014 if you can survive that long.

Alex Watts :

Am I right in thinking once I am discharged an IPA can no longer be made? - That is correct, you are free.

Alex Watts :

Dont forget you are normally discharged after 12 months, so if you wait until April that is 6 months or half way that would have already gone by. So it is a matter for you about timing, but the quicker the better.

Alex Watts :

Can I clarify anything about this for you today please?

JACUSTOMER-hgizabd2- :

Thank you very much for your fast response. I am very pleased with what you say, but I have someone with me at present...Would you mind if I read it through again when I can think clearly on my own, and get back to you later just incase any further queries, please

Alex Watts :

Sure, no problem.

JACUSTOMER-hgizabd2- :

I have to go, but will be back as soon as possible....Maggie

Alex Watts :

Speak to you later Maggie.

JACUSTOMER-hgizabd2- :

Hello again, Sorry I have been away so long. I have now been able to find a lot of info about my actual Tax, and that I will be able to add any to the bankruptcy...Am I right in thinking if in the same year, and prior to my BR I accept the lump sum of my pension, any tax owed on that will automatically be added to my BR aswell...will it be treated as earnings the same as my OAP pension.??

Alex Watts :

Yes that would be right.

JACUSTOMER-hgizabd2- :

My main unanswered concern and I can find no answers is regarding WTC. If I go bankrupt in Feb 2013 I will not have a set of accounts or tax bill to support the claim for WTC at the end of the year for yr 2013/14....How will they know if I have claimed correctly and if I have overpaid or underpaid? And I presume I shall have to tell them about the lump sum?? I don't think that this would go to the BR would it? Sorry if this is not explained too well

JACUSTOMER-hgizabd2- :

I have read that any overpayment would be collected after the bankruptcy, but how would it be worked out without proof of my earnings

Alex Watts :

WTC is a debt. Therefore it can be included.

JACUSTOMER-hgizabd2- :

Yes but I won't know if there is a debt until after the bankruptcy, and I have read for it to be included they would need to send a notice(sorry can't recall what it is called) before my bankruptcy for it to be included....I do not owe any from last year, in fact I got a repayment....But I just can't see how they can work it out without a tax assessment for 2013/14 ..will they just take my word for what I have earned up to the bankruptcy?

Alex Watts :

Yes. You should wait until after the tax year and then go BR, this may be the best way to include everything.

Alex Watts :

Take out the lump sum now, spend it, then if there is a WTC overpayment include it in bankruptcy as a debt

JACUSTOMER-hgizabd2- :

Thank you very much....Yes I agree with that..but that way I shall have to pay tax on the lump sum this year??...So would probably work out the same?

JACUSTOMER-hgizabd2- :

I will leave you in peace now....thankyou for your advice....Maggie

Alex Watts :

If I could invite you to rate my service before you leave today, hopefully it has been excellent. If you do need more help or information please click reply. Thanks – Alex.

JACUSTOMER-hgizabd2- :

Well if you know the answer, the only thing still bothering me is how will WTC office decide if my claim has been correct with no tax assessment .Usually they ask me for the figures from this in May each year...and yes of course I shall rate your service very well...

Alex Watts :

Yes they do normally ask that. You can go online to find out the rough numbers at: https://www.gov.uk/qualify-tax-credits-quick-questionnaire

JACUSTOMER-hgizabd2- :

Ok..Thank you again Alex. bye Maggie ....Oh you have akready gone....

Alex Watts :

All the best Maggie - I hope this works out for you.

Alex Watts :

Please do remember to take a moment to rate before you leave, that is how the site pays me - thank you again and good luck.

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