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Paula23rd November 2013

Please always check Tax Credit Casualties home page for updated information and guidance first!

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Is Your Case Over 6 Years Old?

Paula23rd November 2013

(Edited 23 November 2013)

The Limitation Act 1980 (aka The 6 Year Rule) could be your friend here.

See our Limitation Act template letter for basically all you need to know. But in short, going on the definition of the Limitation Act, HMRC appear to have taken too long to chase you for repayment and as such can now go take a running jump.

I must warn you that when we invoke this Act we are not getting any official confirmation back from HMRC that these cases have been dropped, but then neither are HMRC able to prove (as yet) that the debts should not be cancelled ‘due to limitation’.

Basically I feel that this is just because HMRC know they can’t get round the Limitation Act but are being too petty to officially acknowledge it in writing. They know full well about the Limitation Act, they were just hoping you didn’t; a lot of people don’t realise it includes Tax Credit overpayments.

See the HMRC manual regarding the Limitation Act 1980.

It’s only been in about the last 18 months that we can use this act in old enough cases, because 6 (occasionally 7) years has to have elapsed between the bill being calculated and them still trying to chase you for repayment (without having launched legal action against you). I have now invoked the act in about 30 cases over the last 12 months and as of yet, HMRC have failed to prove it does not apply.

Anyway, to use the Limitation Act complete and send in this template letter to the address the most recent overpayment letter came from.

Don’t be surprised if HMRC respond claiming that the Limitation Act does not apply. They are currently doing this to us on most of these cases and so we have to continue to challenge each one individually (that Limitation does apply). Once I have officially confirmed one case as applicable it should speed up dealing with other Limitation cases, so I will be keeping this page updated with info.

But meanwhile, if you get a HMRC response claiming either that Limitation doesn’t apply to Tax Credits, or that you haven’t responded (when you have), you may want to send this template letter, Response To Limitation Act Doesn’t Apply, to the Tax Credit Office.

We haven’t actually had to take it any further than this so far, but if we do, I will then suggest taking the matter to the Adjudicators Office (see this dispute step for the Adjudicator’s address and basic cover letter you can tweak: www.taxcc.org/dispute5.htm).

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The Difference Between Appeals and Disputes.

Paula22nd November 2013

The difference is explained in full below, but in short, an Appeal is for when you feel HMRC’s Tax Credit Office have used the wrong basic facts to calculate an award (or an overpayment). A Dispute is for all other Tax Credit overpayments.

An Appeal.

An appeal is a more formal process. It’s actually part of the legal system, because people have a legal right to state benefits if they are eligible for them.

Appeals are for when you disagree with the circumstances on which HMRC have based your Tax Credit award or overpayment bill. For instance if they are using a higher income figure than you accept was correct, or they calculate your award based on you only having 2 eligible children when you feel you have 3.

HMRC repeatedly state that you “can’t appeal an overpayment” – while that is technically correct, you can still appeal the award decisions that led to the calculation of the overpayment. So if your Tax Credit overpayment is caused by HMRC using wrong circumstances you would be best served to appeal. But you only have 30 days from being told of the decision (that caused the overpayment), to start an appeal. In rare cases the deadline can be extended, but if you miss it, you need to dispute instead.

When you ‘appeal’ their decision (the calculation decision you think is wrong), the first stage is internal and informal, so you’re dealing with HMRC and the Tax Credit Office.  But if you continue to disagree with their decisions you then get to take it to a formal independent appeal hearing.

Because there is a huge backlog for appeals, you will then go into a queue for an independent appeal hearing. This queue gives HMRC one more chance to try to ‘resolve’ the case. They will informally review your case, yet again. But they may try to imply going further will cause you costs etc or go against you. It will not. They may contact you to ask for yet more ‘evidence’. If you have already supplied everything just tell them so.

Once they have made their review decision, you can either accept it if it’s reasonable, or refuse it and continue to wait for your appeal hearing. Do not be bamboozled into dropping the appeal if they imply you have to. You have every right to continue to appeal.

But only about 5% (roughly) of people who demand a Tax Credit appeal ever actually need to get to the appeal hearing stage, in my experience. This is because the case is resolved to the claimants (your) satisfaction. This is because HMRC try to bluff people into giving up their appeal, but when the victim pushes to continue HMRC have to scramble to clean up any ridiculous or unfair cases at the last minute, before they end up in front of an angry appeal panel; who routinely criticize HMRC for the wasting of everyone’s time and resources.

Note that when dealing with an appeal, the only relevant issues are about your eligibility. Who did what to whom, and why, is not relevant. Only whether HMRC’s calculation decision was correct.

To launch a Tax Credit decision appeal use this form. Most of it is obvious ID stuff, but the last question asks why you disagree. I suggest simply writing that you feel you were entitled to X because of Y. As the form just launches the process and you’ll get more opportunity to go into detail later.

For more information, See Appealing Against A Tax Credit Decision on HMRC’s website.

A Dispute.

A dispute is a more informal process, although you do still have the opportunity to eventually take the dispute to independent bodies to judge.

The basic premise of a dispute is that you dispute responsibility for how an overpayment occurred. Note that you are not denying that there was an overpayment. You’re simply stating that you are not at fault for it.

When someone makes a Tax Credit claim they are agreeing to certain ‘obligations’, such as a responsibility to report changes quickly and to check award notices in case they need correcting. HMRC also have obligations to the claimant, such as to act on notifications quickly & effectively and to give correct advice.

Usually an overpayment bill has several smaller, separate causes, some of which snowball. Using the Code of Practice 26 (COP 26), I suggest demanding answers and unpicking the causes and events to challenge that you met your obligations, but HMRC did not meet theirs.

Note that you should focus your letters, etc, on only things relevant to the dispute. i.e obligations. While it is incredibly difficult, distressing and disgusting how badly HMRC’s Tax Credit Office handle our cases, how they have treated you since the overpayment occurred does not actually have any relevance to who filled their obligations to keep the claim correct.

See our guide here on how to DISPUTE a Tax Credit overpayment.

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Being Harassed By HMRC For Repayment Of A Tax Credit Overpayment?

Paula21st November 2013

It’s now become very common for HMRC’s Tax Credit Office to try to push people into repayment while disputing, and even appealing. It did used to be fairly rare to be chased for recovery whilst challenging a Tax Credit overpayment debt. And it’s always been a grey area.

HMRC’s COP26 states that they will hold off recovery during the first round of disputing, which implies that they don’t have to hold off during further ones. But actually that is a legally dodgy position. People have several different rights offering access to disputing bills and debts etc. Until fairly recently it was just a theoretical issue, because HMRC didn’t actually try to chase recovery at any stage of dispute (except when being extra careless/useless).

While HMRC may have now decided to “stop suspending recovery while disputes are ongoing” it does not mean they legally can, or should. Thankfully we do have some laws that protect us and I am currently advising people to invoke debt and harassment laws when the Tax Credit Office start getting heavy on them about repayment. HMRC have a habit of not checking if their actions are legal, so it’s not actually surprising that they are breaking the law.

I feel that demanding repayment while people appeal or dispute constituents ‘harassment’, which is actually a criminal act. See this harassment template letter for more info. But basically I am now advising victims to threaten to make a criminal complaint of harassment. We haven’t actually got past the stage of just threatening yet, because so far we haven’t needed to, but I am certainly up for assisting anyone should they actually need to make a complaint to the police.

Just complete the Tax Credit Office harassment letter with your details, tweak the red text and then get it sent in to the address the most recent demand came from. If you are getting contacted by a private debt firm I would send a copy to both HMRC and the debt firm.

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HMRC Say You’re A Couple When You’re Not?

Paula5th February 2013

[ Article Updated & Expanded 7 March 2013 ]

If HMRC are investigating your single claim, or have already said they think you are part of a couple, please read below. This page is updated advice for all those who do not feel they should be considered a couple.

HMRC are currently confusing already very worried people by not being clear what’s happening. Basically HMRC have some hints that your ex still lives with you (e.g. his or her post still comes to your address), and using this as an excuse they now want to cancel your award and demand repayment of previously paid awards.

Poorly trained staff will probably tell you that, as their post comes to your address, the case is closed and you are a couple. In short; that’s rubbish. Post isn’t even really an issue here, it’s just the indicator that gave HMRC the opportunity to investigate your claim.

Some of you do still live in the same house as your ex, but not as part of a couple, usually paying your own bills and a share of the mortgage or rent. Despite HMRC recently updating their guidance to be a bit more reasonable, they are still trying to cancel many claims.

Below is advice regarding the main two stages; during investigation and post-decision.

If HMRC Are Still Currently Investigating You:

If HMRC are still currently investigating your single claim, please do supply them with the information they demand. Any decision they make, you can challenge later;  just don’t withhold information from them.

If you do not live with a partner or ex-partner and HMRC are asking for proof that your ex lives elsewhere, the following may be useful evidence your ex lives at a different address now:

  • Anything they had posted to them at their new address including mobile phone bills, credit cards, etc.
  • Any utility bills in their name at the new address: Cable, Internet, maybe?
  • Driving license if they changed their address on it, and car insurance too.
  • Did they inform work of a change of address? Ask the employer for a statement to say this.
  • If they accessed a doctors or dentist giving the new address, they can be asked to provide proof.
  • Possibly embarrassing but useful – have they been arrested, cautioned, caught speeding etc and gave the new address?
  • Are they on the electoral roll at the new address? Or did you have them removed from the roll at your address? That helps indicate they left.
  • A statement from family or others simply saying that this person has lived with them since xxx.
  • 2011 census – what property was the ex registered at for it.

If you do live in the same property as your ex, can I suggest you supply a basic personal statement from you both declaring your financial arrangements and personal circumstances. Please note, if you are married or in a civil partnership; what HMRC are looking for is slightly different than if you are not married or in a civil partnership.

If you are married or civil partnered but not yet legally separated or divorced, a formal separation agreement would be very useful to provide, but if you don’t have one, your aim is to basically prove the separation is likely to be permanent and that you live as independent people, yet in the same house.

If you are not married or civil partnered the following is HMRC criteria for a couple:

  • Living in the same household.
  • Stability of the relationship.
  • Financial support.
  • Sexual relationship.
  • Dependent children.
  • Public Acknowledgement.

Source and more info here

Please include in your statement how you do not meet these criteria. HMRC are supposed to have proof that people meet ’several’ of them to acceptably call them a couple.

If HMRC Have Already Made Their Decision:

If HMRC have already made their decision, said you should not have claimed as single and you do not agree that you are part of couple then you should appeal.

To appeal download, complete and return this form asap: Appeal Form

Please note: you usually only have 30 days from the date you received the decision letter, to appeal. But if you were not informed of your right to appeal or other important reasons prevented you, do still appeal now you know you can, and include a brief explanation for the delay (if its longer than say a week) on the form.

To complete the form I suggest the following:

  • tick [no] for “Will you have a representative at the appeal”.
  • put the date of recent phone call / letter as the date of the decision you are appealing.
  • write in the “why I do not agree with the decision” box something like … “I was not part of a couple during the period in question. My ex partners post still came to my address /  has given my address previously / shares the same house but that does not mean we were a couple. I do not even meet enough of your criteria to be considered a couple. HMRC are illegally interfering with my rights to receive benefits I’m entitled to. As such I appeal the decision”.

Expand further as you wish. See the section above for more information about what HMRC are looking at depending on whether you are married / in a civil partnership, or not.

HMRC will probably respond in about 4 – 8 weeks. They may imply they have ‘already done an appeal’ and that you have lost. This is not true. The proper appeal is run independently and the queue is currently over 8 months.

Simply respond to say you do not accept their decision and wish to continue to the full independent appeal. You should still be ‘in the queue’ anyway, but I no longer trust HMRC to not somehow let cases drop out of the queue.

Past this stage, it would be difficult and risky to give generic advice, so email me Paula@taxcc.org, bring me up to date with case details and what’s happened so far.

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New HMRC ploy against the self employed and separated parents?

Paula13th May 2012

I’ll freely admit I have no other sources of reference or comment on this, but after spending another couple of hours going through the latest emails, I’m seeing more and more evidence of a pattern in many new TC overpayment cases .

It started with the self employed and now includes claimants who have recently ended a relationship with the parent of their child. So, a lot of people, and two groups who you might not see a connection between just yet.

I’d say there are approximately 10 different types of TC overpayment cases overall, and over the years I have tended to see occasional gluts of one type or another suddenly turn up in little cycles against a background of older ongoing cases of all types.

Just after new year I started getting a glut of cases coming to me, all from people who were self employed plus claiming TC for the past few years, and had all now been told they did not meet the ‘work conditions’ (i.e. did not work enough hours to qualify) for one or several of those previous years. Therefore the award for that year was being withdrawn and the claimant now had an overpayment.

Straight away we challenged HMRC’s decisions re not meeting the work conditions, as without fail every one of the claimants said they had already proved to HMRC they had worked more hours, but that HMRC had disallowed some of hours with no explanation. Because this is a decision about entitlement, people can actually Appeal these cases (as opposed to Dispute) which was what we threaten to do if the decision weren’t overturned.

I was pleased but mildly suspicious when nearly all of the cases were very quickly dropped by HMRC (i.e. we won and HMRC reversed the overpayments).

Then the ’separated parents’ cases started coming in. Each case is the same. HMRC have suddenly announced they believe the single claimant is (or was) living with their ex partner (as a couple) while claiming as single, all because of some arrangement to do with the children. Every one of the claimants who’ve contacted me completely defend their innocence and protest they have not been living with their ex. Each case involves some sort of semi complex (but life is) arrangement with the ex partner but none that should, or could reasonably, be seen as living together as a couple.

HMRC are telling the claimants they have to prove they were NOT, when actually the onus is on HMRC to prove they WERE. But then they are ignoring the reasonable and even concrete proof, the claimants supply. Again, as an entitlement decision, this is an appealable issue and so I instructed everyone to ‘apply to appeal’ (i.e. threaten to appeal).

I’m just starting to see some of the results back now, and again so far it seems HMRC are quick to drop the cases when they aren’t going to get a quick repayment out of bamboozling someone with threats, bills and jargon.

I am hearing of so many similar entitlement decision cases suddenly, that I can’t help but think this is a deliberate ploy by HMRC. Some ‘recession special’ attempt to claw back as much money as possible by exploiting personal complexities in the hope the claimants don’t know enough to appeal.

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Bad News and Good News

Paula5th September 2011

Two pieces of very interesting news regrading HMRC and tax credits overpayment. In keeping with the apparent cosmic ‘pleasure / pain’ balance (although pleasure is in short supply when dealing with HMRC), we have one piece of bad news and one piece of potentially good news.

PAY(E) Back!

Bad first. Recovery (aka repayment) of overpaid tax credits via PAYE tax codes.

The Child Poverty Action Group (CPAG) report that tax rules have been changed to make this method possible since July 2011. To quote CPAG’s recent newsletter…

“Letters will go out to claimants who may have an overpayment suitable for recovery in this way, and tax codes would be altered from April 2012 for the 2012-13 tax year. It is thought that this will be an option to recover tax credit overpayments of between £100 and £2,000. The Revenue stated that there would be safeguards to prevent hardship.“

Over the years I have heard of several shocking HMRC plans to automatically recover overpayments, most of them sneaky and sinister. Until now, it’s never been confirmed they had the right to implement them. But I am now starting to see letters to overpayment victims threatening to add attachments to earnings and / or sell their possessions, and I have heard of plans to access people’s bank accounts, but yet again I can get no confirmation they actually have to power to carry out these threats.

I believe a lot of these threats are an exploitation of their tax collecting powers, which they have wilfully misapplied to their separate and very different tax credit role. TCC and other agencies have intervened before when HMRC have tried to use ‘tax evader penalties’ on TC overpayment victims to not only deny them their rights but force recovery of overpayments that haven’t even been explained, let alone investigated as to cause.  Until we intervened, HMRC officials were repeatedly misleading judges and the rest of the judiciary that they were actually allowed to do this when they weren’t. So you’ll understand why I’ve kept a close eye on what HMRC claim they have the power to do. That they have changed tax law to allow themselves this latest method of recovery smacks of HMRC’s arrogance.

My concern is that when HMRC control the method of recovery, as with their ‘automatic recovery’ ( i.e. reducing your current award to repay an overpayment, as opposed to asking you to make payment in cash / direct debit) they abuse the rights of the victim by continually reapplying the recovery method … even when the victim is disputing.  When pushed to comment, HMRC will state that they only have to suspend recovery during the first stages of a dispute, but as this means that victims are apparently then expected to repay an overpayment while disputing that they owe it, I always insist at each new stage that recovery should be suspended and HMRC usually quietly drop the recovery issue while the dispute is ongoing.

The only time I ever have trouble with this is when HMRC have direct access to the recovery method, and so far it’s only been with the automatic recovery.  Each time it comes up I have to argue in circles with HMRC, the Adjudicator’s Office, the Parliamentary Ombudsman and anyone else unlucky enough to answer the phone to me, until they get so bored with me and so stumped for a reasonable response they end up applying the oh-so-technical measure of typing ‘DO NOT RECOVER DURING DISPUTE’ on the victims case notes. (Which usually gets forgotten about within 6 months and I have to go through the whole farce again).

Unfortunately I doubt HMRC are going to be any more reasonable when it comes to hacking our PAYE accounts!

Pick A Number … Any Number!

The other point I wanted to mention, (the potentially good one) has had me scanning new and old reports, loosing count when I run out of fingers and toes, chasing in circles trying to clarify vague terms and gobsmacked at what seems to be blatant obfuscation in making it nigh impossible to compare one year’s figures to another.

What started it was seeing a report ( HM Revenue & Customs 2010-11 Report and Accounts ) that blithely mentions overpayment figures for 2009/10 currently stands at £2.14 billion! I’m almost number blind these days but that one pulled me up sharp. I double-checked our research library figures, spent hours clarifying what was included in the figures I was comparing, then got someone to check my work when all the digits started running off with my faith in myself to keep up. All came back to the same result: That figure is nearly two and half times the figure that’s published on HMRC’s website! In fact once I looked in to it, all the totals for past years overpayments have gone up. Massively.

Now,  I am aware that due to the “annualised nature of the system” (as the smug gits put it), HMRC actually have up to 2 years to fart about with the figures on peoples awards, therefore early report figures will be inaccurate, but that’s quite some margin of error they have going there! HMRC’s own figures said that in 08/09 £0.917 billion had been overpaid, yet the Auditor Generals 2011 report says that £2.27 billion was. Which is interesting, because the lower figure represented nearly 15% of all claims being overpaid, so does this mean it was actually nearer 40% I wonder?  There weren’t enough of the same figures in each of the many reports I looked at to compare all of what I wanted to, but I did spot repeated statements in summaries like “90% of errors are claimant fault” which is not just sloppy mathematically, but also pretty shocking when you consider HMRC is the un-adjudicated source of this so called statistic (therefore very resistant to admitting it may have been their fault).

It’s worth just mentioning that included in these ‘overpayments’ are fraud. It’s an insidiously little trick HMRC have always done that swiftly puts the genuine victims of this farce in the same category as the crime gangs , benefits thieves and jailed insiders who have exploited the system. Sympathy is hard to come by when we’re rubbing shoulders with this lot.

Anyway, the point I’m getting to is that it seems realisation is slowly dawning is that this farce can’t go on. Already they have calculated that £300million MORE THAN EXPECTED was overpaid in 2010 – 11 (total so far £1.5billion, so going on the scale of the previous estimates expected the final total to be around 3 to 4 billion), and that currently an exercise is underway to “assess the value for money of collecting £1.7 billion of tax credit debt not under active recovery”. (Translated; work out if financially it’s worth chasing this debt)

Whisper it; AMNESTY!

Between the upcoming swap to the newly planned benefit; Universal Credit (due in 2013 but expected to take up till 2017 to complete), and a perhaps naive hope of sanity prevailing, I have long hoped that I wouldn’t be the only suggesting this as the only reasonable solution. I don’t expect everyone to understand, just those who have been overpaid by a terrifying amount!

TCC worked out long ago that purely on a fiscal level chasing recovery of overpayments of less than £2000 was uneconomical. And that’s without factoring in the distress, hardship and workload caused to the victims and their family.

I’ve never advocated the rights of swindlers to get away with it, nor aimed to reduce the treasury’s coffers, all I have ever wanted was compassion for the position HMRC put us in and as much justice as possible in resolving it. We were told the money was ours to spend on life’s essentials and we did just that. If HMRC had told me this was actually a 4 figure loan they were going to bully me about for over 6 years, I would never have accepted it and I know many thousands of you have said the same.

TCC have long encouraged victims to keep their dispute ongoing, therefore resisting active recovery, even in the face of the many brick walls and automatons.

So I aim to keep you updated on developments and will end (finally) on that sweet little refrain … Not under active recoveryNot under active recoveryNot under active recovery!

Categories: Fraud & Error, Overpayment Figures, PAYE Recovery|Top|5 Comments So Far

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Tax Credit Overpayments and Bankruptcy

Mark5th January 2011

Dealing with tax credit overpayments in bankruptcy is not as black and white as it may first appear. This article provides you with an insight to how tax credit overpayments are dealt with in bankruptcy.

Please be aware that bankruptcy law relies on case law and HMRC policy can change so it is extremely important that you seek professional advice on how to deal with your debts before you go bankrupt. This article is not a statement of the law.

If you are considering bankruptcy to deal with your debts then you will obviously want any tax credit overpayments included. The good news is that they can be provided that the decision to recover the overpayment is issued to you prior to the date of the bankruptcy order. If it is issued after the date of the bankruptcy order then unfortunately the overpayment is not classed as a bankruptcy debt and remains payable. Further to this any overpayment due to fraud on your part cannot be included in the bankruptcy and will remain payable. The timing of your bankruptcy petition may therefore be important.

HMRC can recover the overpayment

  • from any award of tax credits payable to the person upon whom a notice of overpayment has been served
  • by direct collection where there is no ongoing award of tax credits or where the ongoing award has ceased

Where, at the date of the bankruptcy order, it is the intention of HMRC to recover the overpayment from ongoing awards then HMRC will continue to do so up until the date of your discharge from bankruptcy. This will usually happen on the first anniversary of your bankruptcy or sooner if you are given early discharge. If it was intended to be taken by direct collection then the overpayment will be dealt with in the bankruptcy and you will not be expected to pay anything.

Where tax credits have been claimed jointly, HMRC will pursue any non bankrupt claimant. This is because the debt is considered joint and several.

As you can read, it is possible for a tax credit overpayment debt to remain payable after your bankruptcy. For this reason it is important that you seek advice prior to going bankrupt. For further information on how to seek advice with bankruptcy please visit the bankruptcy advice section of my website.

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Forum Now Closed To New Members

Paula15th December 2010

I am sorry to say that due to an increasing amount of both spammers trying to post inappropriate material, and technical problems with the new members registration process, we are having to close the forum to new members and new posts.

All the threads and posts that have already been made over the 6 years of the forums life will remain viewable, so hopefully these will be of use to you still. Don’t forget you can search through threads to find a topic you’re after.

In preparation for the forum closures we have updated and improved the dispute guide on our main website at www.taxcc.org and I am contactable on paula@taxcc.org

I am sorry we are having to take this step, but as the forum programme is free and we are volunteer staff, we don’t have the resources to keep the forum open, workable and safe for all while continuing the main website and TCC work.

Thank you for your input over the years and I hope the forum has been useful and continues to be so.

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Bankruptcy advice – benefits and consequences

Mark22nd October 2010

The previous post gave an overview of bankruptcy. I will now explain the main benefits and consequences of bankruptcy. Please note that before you decide on bankruptcy it is important that you seek bankruptcy advice.

Benefits of bankruptcy

Clearly the biggest benefit of bankruptcy is that it will discharge you of your obligation to repay your bankruptcy debts. Bankruptcy debts are defined as those that can be legally discharged in the bankruptcy. There are certain debts, such as student loans, that cannot be included. That is one reason why bankruptcy advice is important. Although tax credit overpayments can be included it is important that you time this correctly. Please read my next post for information about bankruptcy and tax credit overpayments.

Another benefit of bankruptcy is that it offers you some legal protection. A creditor will need the permission of the court to commence legal proceedings against you. Further to this existing proceedings can be stayed or allowed to continue as the court sees fit. There is however some creditors, such as a landlord, who can continue with some forms of recovery action. Again, this is where good advice will help you to understand bankruptcy better.

Compared to other solutions bankruptcy is short and assured (providing you meet your obligations). It lasts a maximum of 12 months and your bankruptcy debts will be cleared. Compare this to other debt solutions where you could be repaying your debts for a significant period of time. Upon receiving advice you should be able to determine which solution is most appropriate for yourself.

Consequences of bankruptcy

Unfortunately the number of consequences of bankruptcy outweigh the number of benefits, however, that does not mean that the impact of those consequences outweigh the relief that bankruptcy brings. The following paragraphs provide an overview of the consequences.

The most common knowledge consequence of bankruptcy is that you lose control of your assets. Any that are not exempt from the bankruptcy estate are at risk. It is important for you to establish how your assets are likely to be affected before you go bankrupt.

Following bankruptcy your credit worthiness will be extremely poor. Bankruptcy remains on your credit report for a period of six years. This will affect you in the future, when you apply for a mortgage for example.
Once the bankruptcy order is made your bank will be notified of your bankruptcy. As such your bank account will be frozen and it may be closed.

If you run your own business then it may be closed and any employees dismissed. There is nothing from stopping you set up another business providing you adhere to the bankruptcy restrictions.

Some professions prohibit you from practising as a bankrupt.

Bankruptcy restrictions will apply from the date of the bankruptcy order. There are three stated restrictions which prohibit you from certain actions. It is important to know what they are.

One of the more serious consequences of bankruptcy is known as bankruptcy offences, which are punishable by imprisonment or fine. Although they are uncommon it is important that you understand them to ensure you do not commit one. An example of a bankruptcy offence is concealment of property.

A bankruptcy restrictions order may apply if the investigation into your affairs determines that you are somewhat blameworthy for your bankruptcy. Such an order has the effect of prolonging the restrictions of your bankruptcy for a period of between 2 and 15 years.

If during your bankruptcy you have enough of a disposable income then you will be expected to contribute to your bankruptcy estate for a period of 3 years. This will involve making payments to the equivalent of between 50% and 70% of your disposable income.

Previous transactions that you have entered into may be reversed. An example of this could be repaying a family member in preference of other creditors before your bankruptcy. Another example could be selling assets for less than their market value before your bankruptcy.

Getting bankruptcy advice

The above information provides an overview of the benefits and consequences of bankruptcy only. In reality bankruptcy can become complex and it can benefit you enormously to seek bankruptcy advice. This will help you understand the consequences in relation to your personal circumstances and also remove any uncertainty of the bankruptcy process. In turn this will help you to minimise the consequences.

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