Bankruptcy Case Studies
Case Study 1: Stephen
Stephen was employed full time and lived in a council house. His total debts were £9,800. He also owned his car (valued at £3,000) which he needed for his work.
Stephen also had to pay £180 per month to the Child Support Agency for his son who lived with his estranged wife.
Stephen could not afford a Protected Trust Deed and it would take him over 6 years to repay all his debts in full. As a result, he chose to apply for bankruptcy and agreed to make a contribution of £150 per month to his trustee for three years.
Case Study 2: Karen
Karen had £14,500 in debt. She lived with her husband and two children. She was not a home owner and owned her car, but this was only worth £2,500.
She worked as a secretary in a small roofing company and she could only afford to pay £155 per month towards her debts, hence she could not afford a Trust Deed. Repaying her debts this way would take over 7 years.
She decided to go bankrupt, which required her to pay £155 for 36 months. Her car was not considered an asset because of its value and she had a reasonable requirement for it.
Case Study 3: Thomas
Thomas had five credit cards and two loans. He was 64 years old and had gone into debt when his wife was alive and they had two incomes. Now he couldn’t afford to maintain the payments.
His home had negative equity, as he had taken out secured loans in the past to consolidate other debts, but he still had £29,500 of debt from unsecured loans. We worked out from his financial statement that he could only afford £180 per month, which was not enough for a Trust Deed. It would also take him over 13 years to repay his debts through a DAS, which would be too long.
He decided to file for bankruptcy, meaning he paid £180 per month for three years. His sister agreed to pay £500 to protect his home.
Case Study 4: Helen
Helen came to us after she was involved in a car accident which left her unable to work. She had £37,530 of debts she had accrued using credit cards and loans when she was able to work. She owned her home, but there was no equity in it.
We identified she had over £7,000 in mis-sold Payment Protection Insurance and assisted her in claiming these back. Once she had received this money, we advised her on her options, as she was now fully dependant on benefits and so could not make any contribution to her debts.
She agreed to use the £7,000 to contribute to her bankruptcy as a lump sum and received a discharge from all her debts and liabilities after 12 months. Her sister agreed to pay £500 to protect her home.
Case Study 5: Robert
Robert had acquired over £49,500 in debts after his marriage had broken down.
He explained he had been unable to manage his finances and that they had spiralled out of control, with high interest and penalty charges. This was due to taking out pay day loans and using lots of credit cards.
He worked as a plumber for the local council and explained he could only afford £180 per month after he covered his essentials and maintenance for his children.
This was not enough for the Debt Arrangement Scheme or a Trust Deed. He declared bankruptcy and as a result paid £180 per month for three years, after which his debt would be discharged.
Case Study 6: Angela
Angela had run up debts of £35,000 and had run up mortgage arrears. She lived with her two children.
She applied to the Scottish Government Mortgage to Rent Scheme and her local housing association agreed to buy her home so she and her children could remain living in it as tenants.
There was negative equity in her home, however, which meant another £23,000 was added to her debts, bringing the total to £58,000.
Angela could only afford to pay £200 per month to her debts, which would mean in the Debt Arrangement Scheme it would take her over 24 years to repay her debts.
She decided to go bankrupt and repay £200 per month for 3 years after which her debts were discharged.
Case Study 7: Sharon
Sharon had run a hairdressing business for five years as a sole trader and had used credit cards and loans to finance it, which she was personally responsible for.
She had tried to keep on top of her tax affairs but had failed to file her returns on time. Eventually the HMRC sent her an income tax bill for £29,340 and she had £33,000 approximately in personal debt. Hence her total debt was £62,340.
Eventually she realised her business could not survive and she got a job as a hairdresser. She had no equity in her home and could only afford to pay £230 per month to service her debts on her new income.
Repaying her debts would take her 22 years, so she agreed bankruptcy was her best option, which allowed her to pay £230 per month for three years. Her mother agreed to pay a £500 bond to protect her home.