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Disillusioned

It's Easy To Go Bankrupt!

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I'm finding this hard to believe.

She's declaring herself bankrupt. She has 7 credit cards to pay off but can't. She has no assets that are valuable enough to interest the people wanting the money (house, car etc). She's been to see an insolvency person who has explained the process to her and says that a lot of his friends did this as soon as they realised how easy it was and how it would have no effect on their life. (Obviously he has VI in this process, due to getting paid for it)

I asked her how bankruptcy would affect her life. She has to go onto a special bank account and the bankruptcy will cost her £600 (how ironic :blink: ). She says that, after they do a check on her after 5 or 6 months, she's clear to do what she wants. Her credit history starts again (surely this isn't true!) and she doesn't have to tell anyone about the bankruptcy (i.e. she wouldn't have to tell another money lender).

So, basically, it seems that people can spend money that they don't have and then not pay it back, and there are no significant repercussions!!!

I just thought I'd throw this into the mix. :o

Sorry, I'm unable to check replies this evening. I'll check and reply to any comments tomorrow.

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Apart from not being able to obtain a credit or debit card, find it very difficult to open a bank account bank account and obtain a cheque book, pay her bills by direct debit, hire a car, stay in most hotels, or arrange a normal rate mortgage or loan for many years to come, I do not think this will affect her one bit.

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Apart from not being able to obtain a credit or debit card, find it very difficult to open a bank account bank account and obtain a cheque book, pay her bills by direct debit, hire a car, stay in most hotels, or arrange a normal rate mortgage or loan for many years to come, I do not think this will affect her one bit.

Exactly - if going bankrupt was that easy everyone would be doing it!! :lol:;)

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Guest Charlie The Tramp

These are on the increase now as they are finally dealing with the p**s takers

BRO= Bankruptcy Restriction Order. BRU= Bankruptcy Restriction Undertaking.

These are covered in Section 10 of The Guide to Insolvency

10. Bankruptcy restrictions orders and undertakings

If, during his/her enquiries into your affairs, the Official Receiver decides that you have been

dishonest either before or during the bankruptcy or that you are otherwise to blame for your

position, he/she may apply to the court for a bankruptcy restrictions order. The court may make

an order against you for between 2 and 15 years and this order will mean that you continue to be

subject to the restrictions of bankruptcy which are described in section 8 above. You may give a

bankruptcy restrictions undertaking which will have the same effect as an order, but will mean

that the matter does not go to court.

2004-05

BROs 4

BRUs 18

Total 22

2005-06

BROs 190

BRUs 653

Total 843

2006-07

(to 31/12/06)

BROs 198

BRUs 1,144

Total 1,342

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So, basically, it seems that people can spend money that they don't have and then not pay it back, and there are no significant repercussions!!!

Pretty much, as long as it's not fraud. A few years back they tried penalising people for getting into the mess. This doesn't work, especially once you pit the old fashioned common sense against the billion $$ industry and psychological operations aimed at getting you into increasing debt dependancy. Therefore the government has (correctly in my view) decided to penalise the irresponsible lenders by making debt so much easier to wipe clean. Except debt to the government or student loans company of course!

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Apart from not being able to obtain a credit or debit card, find it very difficult to open a bank account bank account and obtain a cheque book, pay her bills by direct debit, hire a car, stay in most hotels, or arrange a normal rate mortgage or loan for many years to come, I do not think this will affect her one bit.

...but will this really be the case and will it be for years to come? Why would any of these be difficult when you don't have to tell people about your financial past and can walk in to the bank/hotel/car rental with a clean credit rating.

None of the above has been mentioned by her insolvency adviser - in fact there is a special bank account for those who have gone bankrupt! I'll mention these scenarios to her and see whether she thinks they are likely.

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Surely details of the bankruptcy will be recorded by the credit reference agencies which are used by banks, mortgage lenders etc.? So if she tries to deny it, she'll be found out that way.

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These are on the increase now as they are finally dealing with the p**s takers

BRO= Bankruptcy Restriction Order. BRU= Bankruptcy Restriction Undertaking.

These are covered in Section 10 of The Guide to Insolvency

2004-05

BROs 4

BRUs 18

Total 22

2005-06

BROs 190

BRUs 653

Total 843

2006-07

(to 31/12/06)

BROs 198

BRUs 1,144

Total 1,342

Charlie you have to consider that before the enterprise act the vast majority of standard bankruptcies were for 3 years anyway! So the new BRU's only offer benefit to the public beyond that under the old system if they extend beyond 3 years. Also how are they policed? BRU's are worthless IMHO as they rely totally on the voluntary co-operation of the bankrupt who has already proved less than honest by dint of warrenting the BRU in the first place.

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Apart from not being able to obtain a credit or debit card, find it very difficult to open a bank account bank account and obtain a cheque book, pay her bills by direct debit, hire a car, stay in most hotels, or arrange a normal rate mortgage or loan for many years to come, I do not think this will affect her one bit.

Bankruptcy doesn't stop you doing any of the above.

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I think she has taken the IVA route. She will be blacklisted, and she will have to come up with a repayment plan.

Some of the debts might be written off, but she is in for some serious hardship, and unless you emmigrate, you will carry a bad credit history for many years.

Individual & Personal Insolvency

Introduction

An Individual Voluntary Arrangement (IVA) is a formal agreement between someone who owes money (the debtor) and the people he or she owes money to (creditors). An IVA proposal sets out how the debtor is going to repay the creditors, usually over a period of five years.

Due to its formal nature, an IVA has to be set up by a licensed insolvency practitioner such as one of our many approved and licensed practices. Unlike most other insolvency practitioners, our practices do not charge any upfront fees for putting together a client's proposals for an IVA.

If you are considering an IVA with the UK Insolvency Helpline, the following is brief explanation of the process.

After your case has been assessed, a plan letter will be sent to you. This explains the recommended course of action. You will be asked to sign and return a copy of this before we can proceed. Once it has your consent, we will then contact all your creditors to tell them that proposals for an IVA are being prepared and ask them to confirm the amounts you owe.

We will then draw up a set of proposals. These will include your income and expenditure, creditor details, a short history of how the debts built up and a proposal for repayment (including the monthly repayment amount and the duration of the arrangement). You must read these thoroughly, ask questions if you do not understand anything and then sign them.

In some circumstances we may send the proposals to your local County Court for approval with a request for an Interim Order. The Interim Order will protect you from any further court action, including bankruptcy proceedings.

Your creditors will then be sent a copy of the proposals, schedules and all the other details along with the date, time and location of the Creditors Meeting. A representative will chair the Creditors Meeting. You will be expected to attend the meeting so that any points that arise may be clarified without further delay. For an IVA to be approved 75% (in value) of those who vote must agree. Once approved the IVA is legally binding on all creditors, even those who have not voted.

After the meeting a Chairman's report will be sent to all of the creditors and their agents giving the outcome and detailing the votes. If any modifications were made at the meeting then these will be confirmed at this point.

Throughout the duration of the IVA a supervisor will oversee the arrangement. You pay one monthly amount into an account held in your name. Annual reviews of your income and expenditure will be undertaken and an annual report sent to you and your creditors. Providing you stick to the terms of your IVA, at the end of the arrangement your debts will be cleared.

Individual Voluntary Arrangement (IVA) key points: -

An Individual Voluntary Arrangement can give you a level of protection against impatient creditors.

An individual can put together a plan of action and payment for their creditors to vote upon.

A bankruptcy order can be cancelled if a voluntary arrangement has been approved

Individual voluntary arrangements remain on the public register for two years after the date of either completion or termination of the arrangement.

The debtor must have 75%, of those creditors who vote for an individual voluntary arrangement to get it approved.

If the individual voluntary arrangement fails then the creditors can apply for the bankruptcy of the individual.

How to search the Register for records of Bankruptcy Orders and Individual Voluntary Arrangements

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Disillusioned, try hiring a car or staying at a decent hotel without producing a credit card. Impossible! As for not telling a bank or mortgage lender about the bankruptcy.... A simple credit check would instantly reveal the truth. Unless a person changes identity there is no way they could open a current bank account with all the normal facilities or obtain a mortgage from a High Street lender.

Mortgages are available for bankrupts, but they would have to resort to a specialist sub prime lender with all the expensive arrangement fees and high interest rates.

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Disillusioned, try hiring a car or staying at a decent hotel without producing a credit card. Impossible! As for not telling a bank or mortgage lender about the bankruptcy.... A simple credit check would instantly reveal the truth. Unless a person changes identity there is no way they could open a current bank account with all the normal facilities or obtain a mortgage from a High Street lender.

Mortgages are available for bankrupts, but they would have to resort to a specialist sub prime lender with all the expensive arrangement fees and high interest rates.

Simply untrue. There is nothing in the Insolvency Act 1986 or the subsequent Enterprise Act which prevents you operating a bank account or having a credit card.

In regards to the type of bank account you are allowed to operate it depends on the branch manager. Some will refuse an account altogether others will allow a normal bank account. Some will allow an overdraft and cheque book some will not.

A mortgage provider will take account of various things in assessing risk. When peoples finances are in such a mess that they are facing bankruptcy then this will have little effect.

I have been informed that a CCJ has more effect on your credit rating than a bankruptcy order. Both are removed from your credit record after 3 years anyway AFAIK.

In any event having just been relieved of a crushing burden of debt why on earth would you want to get more credit?

Of course bankruptcy has consequences but they aren't very onerous IMHO. What's the alternative? Struggle on with an unbearable level of debt for 25 years?

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I think she has taken the IVA route. She will be blacklisted, and she will have to come up with a repayment plan.

Some of the debts might be written off, but she is in for some serious hardship, and unless you emmigrate, you will carry a bad credit history for many years.

Individual & Personal Insolvency

Introduction

An Individual Voluntary Arrangement (IVA) is a formal agreement between someone who owes money (the debtor) and the people he or she owes money to (creditors). An IVA proposal sets out how the debtor is going to repay the creditors, usually over a period of five years.

Due to its formal nature, an IVA has to be set up by a licensed insolvency practitioner such as one of our many approved and licensed practices. Unlike most other insolvency practitioners, our practices do not charge any upfront fees for putting together a client's proposals for an IVA.

If you are considering an IVA with the UK Insolvency Helpline, the following is brief explanation of the process.

After your case has been assessed, a plan letter will be sent to you. This explains the recommended course of action. You will be asked to sign and return a copy of this before we can proceed. Once it has your consent, we will then contact all your creditors to tell them that proposals for an IVA are being prepared and ask them to confirm the amounts you owe.

We will then draw up a set of proposals. These will include your income and expenditure, creditor details, a short history of how the debts built up and a proposal for repayment (including the monthly repayment amount and the duration of the arrangement). You must read these thoroughly, ask questions if you do not understand anything and then sign them.

In some circumstances we may send the proposals to your local County Court for approval with a request for an Interim Order. The Interim Order will protect you from any further court action, including bankruptcy proceedings.

Your creditors will then be sent a copy of the proposals, schedules and all the other details along with the date, time and location of the Creditors Meeting. A representative will chair the Creditors Meeting. You will be expected to attend the meeting so that any points that arise may be clarified without further delay. For an IVA to be approved 75% (in value) of those who vote must agree. Once approved the IVA is legally binding on all creditors, even those who have not voted.

After the meeting a Chairman's report will be sent to all of the creditors and their agents giving the outcome and detailing the votes. If any modifications were made at the meeting then these will be confirmed at this point.

Throughout the duration of the IVA a supervisor will oversee the arrangement. You pay one monthly amount into an account held in your name. Annual reviews of your income and expenditure will be undertaken and an annual report sent to you and your creditors. Providing you stick to the terms of your IVA, at the end of the arrangement your debts will be cleared.

Individual Voluntary Arrangement (IVA) key points: -

An Individual Voluntary Arrangement can give you a level of protection against impatient creditors.

An individual can put together a plan of action and payment for their creditors to vote upon.

A bankruptcy order can be cancelled if a voluntary arrangement has been approved

Individual voluntary arrangements remain on the public register for two years after the date of either completion or termination of the arrangement.

The debtor must have 75%, of those creditors who vote for an individual voluntary arrangement to get it approved.

If the individual voluntary arrangement fails then the creditors can apply for the bankruptcy of the individual.

How to search the Register for records of Bankruptcy Orders and Individual Voluntary Arrangements

Probably a mistake. 95% of people should take the bankruptcy route unless there are compelling reasons such as membership of a professional body or perhaps an inheritance or property with shed loads of equity.

Remember that many insolvency practitioners will steer you towards an IVA as that is how they make their money.

In addition any initial advice should be free of charge. Be very wary of any firm that wants to charge an up front fee for advice.

If an IVA relies purely on monthly contributions you should be aware that such payments will be at a higher level than you will pay in bankruptcy and will last longer (bankruptcy max of 3 years - most IVA's 5 years plus.).

Most IVA's will make provision for an automatic petition for bankruptcy if the IVA fails.

So it is possible that you are in an IVA for 4 years - have a change in circumstances (say lose your job) and find yourself in bankruptcy any way!

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Sorry to disagree with you Solvent Celt but I stand by what I said. At no time did I say bankrupts were barred from opening up a bank account or arranging a mortgage. I said they would have great difficulty in starting a bank account with all normal banking facilities.

I phoned up a couple of friends. One is the manager of a busy Nat West branch in North London, the other an assistant manager in a Barclays branch in Hertfordshire. Both said that normal guidelines would only extend to opening a very basic bank account for a declared bankrupt. A cheque guarantee card and credit card would most definitely not be offered. As for overdraft facilities, forget it.

Mortgages for bankrupts are obtainable from specialised sub prime lenders. Some High Street lenders have specialised lending under different names. For instance, Bradford and Bingley are behind Mortgage Express, The Portman has the Mortgage Works.

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Sorry to disagree with you Solvent Celt but I stand by what I said. At no time did I say bankrupts were barred from opening up a bank account or arranging a mortgage. I said they would have great difficulty in starting a bank account with all normal banking facilities.

I phoned up a couple of friends. One is the manager of a busy Nat West branch in North London, the other an assistant manager in a Barclays branch in Hertfordshire. Both said that normal guidelines would only extend to opening a very basic bank account for a declared bankrupt. A cheque guarantee card and credit card would most definitely not be offered. As for overdraft facilities, forget it.

Mortgages for bankrupts are obtainable from specialised sub prime lenders. Some High Street lenders have specialised lending under different names. For instance, Bradford and Bingley are behind Mortgage Express, The Portman has the Mortgage Works.

All I can do is offer you my own experience having worked in the field for a good many years. My experience in dealing with hundreds (if not thousands) of bankrupts is that it is down to the discretion of the individual bank manager. I've seen both extremes - bankrupts refused an account point blank to being offered a full range of services inc overdraft, cheque book and guarantee card. Make of that what you will but that is the reality. I've also known bankrupts obtain credit cards shortly after being made bankrupt.

As for booking a hotel and paying for a hire car even I've done both those things without a credit card.

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Hello Solvent, I appreciate your experience with dealing with bankrupts. I did not mean to criticise your posts.

Hey no problem - even I can be wrong on these things.

I don't doubt your contacts are telling you the truth it's just that in my experience the same bank can give a widely divergent service from branches only a few miles apart.

I used to regularly get calls from banks saying they had a bankrupt customer in the branch trying to open a bank account and could they have one!!! :lol:

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