Luckily, partial and full remissions are available in a number of scenarios.
If you are in receipt of the following benefits you can get a full remission;
To prove that you are in receipt of these benefits you need to include an official letter from the organisation responsible for your payments in the documentation you provide as part of your application. So, depending on the benefit in question this might be the Job Centre, The Department for Work and Pensions or the HMRC.
This letter will need to show your title, full name, address and postcode and confirm that you are currently receiving that benefit. It will also have to be less than a month old at the time you make your application (except for Working Tax Credit or Pension Credit, which will be valid as long as they refer to the current financial year.)
If you have a low level of income you can also get a full remission. What’s classed as a low income will depend on whether you are single or part of a couple and whether you have any children, as shown in the table below. Note that even if the court fees are being charged as part of the cost of getting divorced, as you’re still legally married you count as a couple for remission purposes.
If you have more than 4 children the threshold goes up by £2,930.
| Annual Income (Gross) | Single | Couple |
|---|---|---|
| No Children | £13,000 | £18,000 |
| 1 Child | £15,930 | £20,930 |
| 2 Children | £18,860 | £23,860 |
| 3 Children | £21,790 | £26,790 |
| 4 Children | £24,720 | £29,720 |
You will need to be able to prove your income. If you are employed, you can do this by providing your last three month’s payslips (or last four weeks’ slips if you’re paid weekly). If you’re self employed you can prove your income with a tax return, HMRC self assessment or other documentation.
You also have to declare any other income you may have of any kind. Be it income from stocks and shares, rent from a lodger, a pension or child benefit.
You can also get either a full or partial remission based on the level of your disposable income (the amount you have left over once essential expenses have been paid for).
To apply for this form of remission you will need to show your income as described above, but you will also need your monthly expenses. These consist of;
As well listing however much you are spending on the above you can also add fixed amount for the following;
When you’ve submitted you evidence the court will work out your disposable income and if it’s less than £50 a month you will get a full remission. If it is more you will get a partial remission based on how much you can afford.
To apply you need to fill in a EX 160 form (which you can download by following that link) and collect the evidence you need to support your application as detailed above. You can either post this to the court you are dealing with or take it their in person.
If you paid a court fee and think you would’ve been eligible for a remission you can apply retrospectively for up to 6 months from making payment. As well as evidence to show your eligibility for a remission, you need to provide evidence of having paid the fee.
]]>As you can see a large portion of your outstanding debts written off in the space of just a year, bankruptcy is sometimes, financially speaking, not just a necessity but a positive step towards becoming debt free. However, the process of becoming legally bankrupt does entail certain costs.
There are two court fees you need to pay when being declared bankrupt. The first of these fees is the Official Receiver Fee. Currently this fee stands at £525. This pays for the efforts of the Official Receiver who works for The Insolvency Service to oversee your bankruptcy, collect/protect your assets, act as your trustee where appropriate and organise your discharge. This fee has to be paid before you can become bankrupt.
At £125 the court fee is considerably less. Furthermore, if you’re on certain benefits or living on low income you may be able to claim exemption form the fee, or at least a partial remission. To do this you’ll need to fill in an EX160 form and provide documented evidence of your financial situation, such as bank statements.
The Court’s and Tribunals Service have produced a pamphlet entitled ‘Court Fees – Do I Have to Pay Them’ that helps explain under exactly what circumstances you’ll be exempt. It also offers guidance on how to fill out the form properly.
Unless you can get a remission on the court fee, your bankruptcy costs will total £700. Naturally, most people looking at insolvency will not have such a sum at their immediate disposal.
Fortunately, there are a variety of ways in which you can go about raising the funds. As long as you can demonstrate that all the money is going towards the fee you can stop paying your creditors so as to get the money together (as long as they are featured in the bankruptcy).
Alternatively, you can borrow from family or friends who can then receive a reimbursement from the official receiver out of the administration fund later on (assuming it’s sufficient).
Depending on your profession, you may be able to get help from a worker’s union. If you’re in the armed forces or the police for example this could well be an option. You may also be able to get help from the Citizen’s Advice Bureau.
Though, as part of your bankruptcy, your assets will come under the control of the receiver, you’re able to sell assets so as to pay your fees.
You do not need help from a legal professional of any kind in order to declare yourself bankrupt as the process, including all the paper work, though fairly detailed and extensive, is straightforward. However, when you go to court you will need to swear that your ‘statement of affairs’ (a document in which you detail your financial situation) is true. This has to be done in front of a solicitor and will cost about £7.
Payment has to be provided either in cash, by postal order or by bank, building society, solicitor’s or charity cheque. Cheques should be made payable to HM Paymaster General. Courts will not accept personal cheques or credit card transactions.
It’s normal to be discharged after a year of bankruptcy however, you may go on paying off your debts for a longer time under the terms of an IPA (Income Payments Agreement) which can last for up to three years. (If you refuse to make payments as part of such an agreement you can be ordered to by a court as part on an Income Payments Order). Unless you can show that all of your income is needed for essentials, you should be prepared for these ongoing costs.
]]>Here we’ll explain how an IVA works, the ways in which it differs from bankruptcy and what the process of setting up an IVA entails.
An IVA is a legally binding contract between a debtor and their creditors which outlines how money owed is to be repaid. This agreement will specify a sum to be paid monthly according to what that debtor can afford. The payments will then be made for a period of five or, where necessary, six years.
A professional insolvency practitioner will work with you, first as a ‘nominee’ to help negotiate a favourable agreement with your creditors, and then as a ‘supervisor’ to ensure the IVA is upheld. Using an IVA you can consolidate your debts, gain protection from aggressive creditors and move towards a clean financial slate.
Like bankruptcy, an IVA is legally recognised as a form of insolvency and will have a sizeable affect on your financial affairs. Like bankruptcy, an IVA will stay on your credit file for at least 6 years, and, as with bankruptcy, you won’t be able to gain access to unsecured credit whilst under an individual voluntary arrangement.
However, there are some hugely importance differences between the two forms of arrangement. To really understand of how an IVA works you need to be clear on the ways in which it is distinct from bankruptcy;
Going bankrupt places a wide range of restrictions on you which can affect, not only your finances, but also your career and social life. Many of these restrictions can be avoided by securing an IVA with your creditors. Depending on your own circumstances this could make an IVA a considerably more advantageous course to pursue. Here’s a look at some of the key areas you’ll want to take into account;
With an IVA you’re entitled to hold a current account and take advantage of the convenience that comes with being able to use the associated banking facilities. This can make maintaining your lifestyle much easier. Under bankruptcy this privilege would be denied you.
As with bankruptcy, an IVA will appear on the insolvency register. As such, it is possible for members of the public to find out about your circumstances. However, unlike bankruptcy, IVAs are not announced in newspapers. The agreement is a private one between you and your creditors, and you’ll be paying them rather than the government’s Official Receiver, making it a far more private process.
Whilst you are bankrupt there are certain professional positions you’ll be barred from holding. For example, you couldn’t work in certain jobs in the financial sector, the armed forces or the police. With an IVA you can continue in these lines of work. Likewise, if you are a business owner you can continue to trade whilst bound to an IVA. If you file for bankruptcy, this isn’t an option.
If you become bankrupt, your assets will be used to pay off your debt. One of the biggest concerns for those facing this situation is the loss of their home. With an IVA, by tying yourself into a longer term plan, you can negotiate the safeguarding of such possessions.
As a result your creditors can be assured that you’ll be able to pay them through regular instalments, negating the need for the sudden lump sum that comes from liquidating capital such as property. That said, your supervisor may well ask that you consider re-mortgaging as a way of rearranging your outgoings to ensure you can meet your payment schedule. Furthermore, you might need to release some of the equity in your home to raise finances. If you live as a tenant you may have to check your landlord has no problem with you entering into an IVA.
For a lot of people, when the above issues are taken into account, an IVA will work out cheaper than going bankrupt. Your nominee/supervisor will need to be paid, but this will be taken as a percentage of your monthly payments which, thanks to their work, should be affordable. Considering that as much as 65% of your total debt can be written off using an IVA, it’s often preferable to incurring the losses that come with bankruptcy. There is, however another side to this argument, which we’ll look at down the article.
Aside from being distinct form bankruptcy, an IVA can actually be used to halt bankruptcy proceedings. By securing an IVA you can stop creditors from forcing bankruptcy upon on you. In fact, generally speaking, creditors will also be in favour of an IVA. Due to an IVAs status as an individual insolvency procedure rather than a legal bankruptcy procedure, they can claim tax relief on bad debt.
Of course, not all the facets of an IVA are more attractive than bankruptcy. In some cases the following considerations may make it a less viable path to follow;
In most cases bankruptcy only lasts a year or so before the debtor is discharged, whereas an IVA will tend to be much longer term arrangement. Though living under an IVA can be less distressing than bankruptcy, five years is a long time to follow such a strict regime, unable to use things such as credit cards or even mobile phone contracts.
For a lot of people, the fact that there’s no professional disqualifications or automatic loss of assets means an IVA will be cheaper than bankruptcy, but this won’t always be the case.
An IVA is designed to strike a balance; you’ll avoid the difficulties of bankruptcy and, in return, your creditor is assured of receiving a respectable portion of the funds owed. Whilst an IVA can result in three quarters or so of your debt being written off, with a bankruptcy an even higher amount could potentially be eliminated from the sum you owe. In some scenarios, particularly if you have no assets to protect, bankruptcy could be favourable. You’ll need to seek expert advice from an insolvency specialist on this point.
The fact that an IVA is legally binding cuts both ways. If you fail, for whatever reason, to keep to your repayments up the arrangement could be breached and, once again, you’ll facing the prospect of becoming bankrupt. Unfortunately, even if you can see problems on the horizon, unlike a debt management plan, the agreement can’t be cancelled.
Finally, if your circumstances change the terms of the IVA can also be amended to reflect the new situation. So, if for example, you suddenly start earning considerably more money, you’ll still be tied into the IVA, but you’ll end up paying back a much bigger portion of the debt as your supervisor will have to up your monthly repayments. This can undermine the cost effectiveness of the IVA.
Mortgages
You can still get a mortgage with an IVA – companies such as IVA Mortgage Expert specialise in it.
Insolvency is a complex issue and there’s no straight forward answer to this question. You should always seek the advice of a specialist to help asses your options. However, given the points listed above you may find that an IVA will be your best option if you have valuable assets which want to protect, if you have a steady source of income which will make your repayments achievable, or if you work in a field where bankruptcy will jeopardise your career.
If you’ve determined that an IVA will be the best way to proceed, the first thing you need to do is find an insolvency practitioner to work with you. Insolvency practitioners are licensed professionals, usually either accountants or solicitors who specialise in taking on insolvency cases.
To find such a professional to work with you, you can ask for a list of practitioners from your local court or you can consult a list available from the Official Receivers office nearest you. You can also search online using the insolvency practitioner directory.
In a bankruptcy case it would an insolvency practitioner that would act as a ‘trustee’ and take charge of your assets. With an IVA they act as a ‘nominee’, helping to mediate the terms of your agreement with your creditors and arrange your repayments.
Before presenting the court with the details of your circumstances, the practitioner working with you will obtain what’s known as an ‘interim order’. This will stop any persons or organisations that you owe from brining a bankruptcy petition, or any other legal action, against you. (Bear in mind that you cannot obtain an interim order if one has already been awarded to you within the last year).
Once this is done, your nominee will put forward to the court a proposal for an agreement on your repayment strategy. This proposal will have to document your debs and give an account as to how they built up. It will also have to include an assessment of your lifestyle and spending habits along with details of how you intend to pay. (Bear in mind, you’ll need to be able to put at least £200 a month towards the agreement.) Next, in order for the IVA to become legally binding, all your creditors must receive notice of your proposal so they can be given a chance to vote on it.
This vote will take place at a later meeting. Your creditors do not need to turn up, they can vote by proxy as well as in person, or not at all. If 75% of the creditors who cast a vote are in favour of the resolution it becomes binding on all of them, whether they voted or not (as long as they did receive notice that the vote was happening.)
This binding legal status is where an IVA is distinct from other debt solutions. As long as you stick to it, you’re afforded protection from any further pressure from your creditors. This is why it’s very important that all due care is taken to retain contact details for your creditors so that they can be informed before a vote on the IVA takes place. Even if you proposal gets approved, if you missed out a creditor they’ll be free to continue pursuing the debt and could continue to contact you, undermining one of the biggest benefits of an IVA; freedom from having to deal directly with creditors.
Once the arrangement has been approved, your nominee will become your supervisor and will oversee your monthly payments for the duration of the arrangement and will make an annual report on your income and expenditure which will be sent to your creditors and their agents. At the end of the IVA your remaining debts will be written off. Once the arrangement has been completed, details of the IVA will be kept on the public register for two years.
Finally a word on fast track voluntary agreements. Generally an individual voluntary agreement is used as an alternative to bankruptcy, however, if you’ve already become bankrupt, you can still get an IVA. In this situation you may not have to use a regular insolvency practitioner. Instead you can have the Official Receiver act as you supervisor along with their other responsibilities pertaining to your financial affairs. This is only a suitable course of action in specific situations, again you should seek professional advice before making a decision. You can find out more about these agreements from the insolvency service.
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