Tilly Is Going Bankrupt (here we go again )

[mcuth]

See if you can delay the bankruptcy until 6th April. Once you are made bankrupt your tax rate for the remainder of the financial year is nil.

No point in going bankrupt in March and only getting a few days tax relief!

 

Hmm, yeah, your tax code is set to NIL, but that's because the OR will want you to hand over your normal tax element of earnings as an IPA (or part of a larger IPA if disposable income)! Better to go BR in March methinks...

 

Cheers

Michael

[mcuth]

Yes you do have to take into consideration how much you are going to be earning. If the amount untaxed is lower than the limit allowed by the OR for reasonable living expenses then you will still be OK and have the benefit of having the extra income that would otherwise go in tax.

 

If the untaxed amount is above the OR's limit then you may want to pay the tax. You're going to have to pay something, either to the OR or HMRC.

From my point of view anything paid to the OR goes to the creditors so I would plump for the HMRC.

 

I don't think that's quite right... from Income Payments Agreements and Income Payments Orders

"Applying a 'Nil tax' code

 

If you pay tax under PAYE, HM Revenue and Customs (HMRC) will usually apply a 'nil tax' code to you for the rest of the tax year in which you were declared bankrupt. This means that soon after your bankruptcy, your employer will be told NOT to take any more income tax from your wages for the rest of the tax year. HMRC applies nil tax codes for various reasons, and the new tax code will not tell your employer you are bankrupt. The nil tax code does not mean no tax is due. It just enables HMRC to claim the whole of your unpaid tax for the year of your bankruptcy.

 

There will be extra money in your pay because of the nil tax code. This money will form the basis of an IPA or IPO, even if you have no other real disposable income. A nil tax (or NT) IPA or IPO may be the only amount you have to pay, and the agreement or order will stop when your tax code changes. If you have other real disposable income, the IPA or IPO will reduce when your tax code changes" (my bolding)

 

Here's a trivial example -

Assume you are getting £1000 per month and assume for the sake of illustration that the OR's limit for reasonable living expenses is £800.

If you paid no tax then the OR would want £200 per month.

 

No, the OR would want ~50% of the £200 - see Technical: IEL Reference Guide: WAGES OWED

 

Cheers

Michael

Edited January 8, 2009 by mcuth

[mcuth]

Thankyou

 

That has made it a lot clearer, no other disposable income, will just be my wages, and luckily no other debts, so all what they take will go towards paying the shortfall of the mortgage, one more question, what happens after the year is up, do they carry on taking money from wages or is it stopped after that year and im free so to speak

 

Np

As far as I can gather, if the IPA is only made up of the tax element, then at the end of that tax year (i.e. when your tax code changes back) the OR will probably suspend your IPA - the OR may even take the view that an IPA is no longer appropriate (see "What happens if I miss a payment under my IPA or IPO?" at Income Payments Agreements and Income Payments Orders)

 

Cheers

Michael

[mcuth]

This depends on whether an IPA is made or not. I'm assuming it isn't because the available funds aren't sufficient. You are assuming they are.

We're talking about different circumstances ...

 

Not at all - the guidance I linked to says that if you pay tax, the amount of tax you would've paid (but won't because of the NIL tax code) will be payable as an IPA whether or not there is any other income that could be assessed for an IPA.

 

Basically, if you pay tax currently, there will be an IPA (for the tax year you're bankrupt in, so a max of 12 months) of at least what your tax would be - see the last bolded para in my quote from the guidance.

 

ISTBC, of course

 

Cheers

Michael

Edited January 8, 2009 by mcuth

[mcuth]

i take if i go bankrupt the shortfall gets passed to ex

 

Presume so, if you were jointly liable for it and the ex isn't going bankrupt of course...

 

Cheers

Michael

[mcuth]

Does anyone know how i disassociate myself from the ex on your credit report, i really need to do this asap !!!

 

How about this?:

Notice of Disassociation - Consumer Wiki

 

or this:

National Debtline England & Wales | Debt Advice | Factsheet 05 Credit Reference Agencies

 

I think the CRAs have sections on their websites about them too....

 

HTH

 

Cheers

Michael