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Below are some of the most frequently
asked questions from our Debt Forum and Ask
the Expert sections.
I have been made
Bankrupt – what will happen to my home?
Under current legislation if a person is
made bankrupt then their spouse or partner
may wish to purchase the “beneficial
interest” of the bankrupt spouse/partner
usually 50% of the equity currently in the
property ie the value less any outstanding
mortgage. You will need to seek the agreement
of the Official Receiver. The property will
need to be valued and an amount agreed. This
should be done within the first 12months of
the bankruptcy order. If the beneficial interest
is not purchased then the OR has powers to
force a sale of the property at any time either
during or after the bankruptcy period to realise
the asset for the benefit of creditors. Under
new legislation the Enterprise Act due to
come into force in April 2004 there will be
a limit of 3 years set on the time that the
OR has to realise this asset or take action
towards this but this will not affect property
already subject to a bankruptcy order.
Please explain “beneficial
interest” in relation to property in
bankruptcy.
Under current legislation if a person is
made bankrupt then their spouse or partner
may wish to purchase the “beneficial
interest” of the bankrupt spouse/partner
usually 50% of the equity currently in the
property ie the value less any outstanding
mortgage. You will need to seek the agreement
of the Official Receiver. The property will
need to be valued and an amount agreed. This
should be done within the first 12months of
the bankruptcy order. If the beneficial interest
is not purchased then the OR has powers to
force a sale of the property at any time either
during or after the bankruptcy period to realise
the asset for the benefit of creditors. Under
new legislation the Enterprise Act due to
come into force in April 2004 there will be
a limit of 3 years set on the time that the
OR has to realise this asset or take action
towards this but this will not affect property
already subject to a bankruptcy order.
I am now living
overseas – what will happen to my debts
in the UK?
Ideally you should have dealt with all of
these matters before leaving and the usual
long term result for moving to the abroad
leaving debts in the UK is that the creditors
sell the debts on to local firms who can use
the local legal system against you which can
be anything from 6 months to 6 years to come
to fruition. So the fresh start and new life
you are building for yourself will one day
be at risk.
If you have already moved (and do not have
any substantial assets) you might consider
returning to the UK to present your own bankruptcy
petition here under UK law. You would have
to present yourself at the High Court office
in London with the necessary forms (available
from www.insolvency.gov.uk).
The present cost for petitioning your own
bankruptcy is £390.00 rising to £450.00
or more from April 2004.
You would only have to stay in the country
a few days just enough to visit the Insolvency
Services offices and have an interview with
the examiner dealing with your case. They
will want to know who you owe what to and
why your circumstances changed so that you
could not afford to maintain your debts. The
only remaining issue would be whether you
personally (not your partner) have any surplus
income to repay your debts each month once
you have met your essential expenditure. If
you have then they will ask you to pay between
50% and 60% of it to them for up to 3 years.
If not then you will not have to pay anything
further at all.
You have the option to do this up until
the point that you have been permanently absent
from the UK and resident in another country
for 3 years although it is likely that local
action will have been started against you
long before this deadline is reached.
Once discharged which could be as little
as a year away you would be free to build
you new life free from debt or worries about
any comeback in years to come.
UK credit referencing information does not
travel well, if at all, so once your bankruptcy
is discharged you should encounter no more
problems than normal in obtaining credit in
your new place of residence.
What can you tell
me about the new Bankruptcy Law?
From the 1st April 2004 the law concerning
bankruptcy will change. The usual term for
bankruptcy was previously 2-3 years. From
1st April 2004 most bankruptcies will be discharged
within 12 months.
The purpose for the changes is so that those
who have been unavoidably made bankrupt for
genuine reasons are given a better chance
to start again.
The position is different for an individual
who has been an undischarged bankrupt more
than once in the previous 15 years and who
was still undischarged at the time the new
law came into force. In this case, if the
court has previously granted a discharge,
that order will continue to determine that
date of discharge. If no such order has been
made the bankrupt will be discharged on 1
April 2009 (5 years on from 1 April 2004),
or by a court order. People made bankrupt
through a criminal bankruptcy can only be
discharged by order of the court.
Individuals who go bankrupt for a second
time after 1.04.04 will be discharged after
one year the same as anyone else unless the
Official Receiver decides to suspend the discharge
date or apply for a Bankruptcy Restriction
Order.
If you are currently bankrupt, and your bankruptcy
term will go beyond 1st April 2005, you should
be discharged one year from 1st April 2004.
If you are currently bankrupt and your bankruptcy
order finishes in less than 1 year from the
1st April 2004, the order will end as normal.
Other significant changes relate to the
treatment of assets. Whereas previously there
was no time limit, The Act sets a limit of
3 years on the period during which the trustee
in bankruptcy can deal with a bankrupt’s
interest in a home which is the sole or principal
home of the bankrupt, the bankrupt’s
spouse or a former spouse. After this period
it will revert back to the bankrupt (i.e.
it will no longer form part of the bankruptcy
estate).
The cost of a petition to be made bankrupt
has also changed from £390 rising to
£450 from 1st April 2004.
If you are considering bankruptcy and would
like free advice and information on this and
other options you can e-mail us or call 0800
716239.
Further help and information can be found
at:
www.shawsinsolvency.co.uk
Or the Insolvency Service website:
www.insolvency.gov.uk/home.htm
What is a Debt Management
Company?
A Debt Management company is a company who
will act on your behalf to negotiate reduced
affordable monthly payments to your creditors.
They will work with you to establish an affordable
payment from looking at your monthly income,
working out how much you need to pay your
priority debts such as rent, council tax and
house hold bills and your housekeeping, and
any secured debts you may have eg car HP.
The amount of money you have left over “monthly
surplus” is the amount they will use
to offer to your creditors.
Once a figure has been agreed, you pay this
amount into your arrangement for the DMC to
distribute until the debt is paid off. Creditors
may agree to freeze interest and charges on
your debts but this cannot be guaranteed.
When choosing a debt management company
be careful! Companies offering this service
vary greatly. Some companies charge you fees
for putting together a Debt Management Plan
whereas other companies pass the cost onto
the creditor so you do not pay up-front fees.
Also, make sure that the company you choose
will send you regular statements if you require
them. This is to ensure that the payments
to the creditors are actually being paid regularly
and are not simply gaining interest for the
debt management company.
For help and advice contact Payplan (no
fees DMC) on 0800 085 4298
of visit www.payplan.com
Why have I been refused
credit ?
There may be no obvious reason as to why
you have been refused credit. Each creditor
has a scoring system that is used when making
a decision to lend money. This is based on
a number of factors including where you live
and your occupation, length of time in employment
etc.
Most lenders will also search your credit
file. If you have defaulted on credit agreements
in the past this could also affect your credit.
If you have been refused credit and you
know no reason as to why, you will need to
apply to a credit reference agency for a copy
of your credit file. Your file can be affected
by people living or who have lived in the
same property as you. If this is the case
and they have a bad credit history, this could
reflect on you and affect your credit rating.
When you receive your credit file you need
to make sure that there is no false information
is held about you that could be affecting
your credit rating. If this is the case, it
is possible to write to the credit reference
agency who hold your credit file details and
request them to remove this information and
update your credit file with the correct information.
The main credit reference agencies
are:
Callcredit PLC
Consumer Services Team
PO Box 491
Leeds
LS3 1WZ
Helpline: 0870 060 1414
www.callcredit.plc.uk
Equifax PLC
Credit File Advice Centre
PO Box 1140
Bradford
BD1 5US
Tel: 08705 143700
www.equifax.co.uk
Experian Ltd
Consumer Help Service
PO Box 8000
NOTTINGHAM
NG1 5GX
Tel: 0870 241 6212
www.experian.co.uk
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