Debts included in Bankruptcy
Most unsecured debts are included in Bankruptcy. However there are some which are not.
Jump to article contents:
- Which debts are included in Bankruptcy?
- Can benefits overpayments be included?
- Which debts cannot be included?
- What about joint debts or guarantor loans?
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Which debts are Included in Bankruptcy?
When you go bankrupt almost all of your unsecured debts are included. These are things like bank loans, credit cards, store cards, overdrafts and Payday loans.
Money owed to HMRC is added to your bankruptcy. Income tax arrears and VAT from a self employed business are all included and written off.
CCJ and Attachment of Earnings
If a CCJ has been issued against you this debt is also included. In addition an attachment of earnings already in place is overturned. The deductions from your wages will stop.
You do not need to list all your creditors in your application. Under section 382 of the Insolvency Act 1986 any provable debts you are liable for are automatically included whether listed or not.
Can Benefits Overpayments be included in Bankruptcy?
In 2011 the Supreme Court held that the overpayment of benefits (for example housing benefit, JSA and tax credits) are provable in bankruptcy (Secretary of State for Work & Pensions v Payne Dec 11).
In other words if you have these types of debts they will normally be included and written off after you go bankrupt.
In addition the Court ruled that if deductions are currently being taken from your ongoing benefits to recover overpayments these must stop.
Debts as a result of fraudulent activity cannot be included in Bankruptcy. As such any benefits overpayments which were the result of fraud can still be collected.
Which Debts Cannot be Included in Bankruptcy?
There are a number of debts that cannot be included in bankruptcy. The most common of these are secured debts. These are things like a mortgage secured against a property or finance secured against a vehicle.
If they were included you would have to stop making the agreed monthly payments. As a result you would risk the things they are secured against being repossessed.
In addition there are some unsecured debts that can never be written off by bankruptcy. These include:
- Court Fines
- CSA (Child Support Agency) Arrears
- Student Loan Company Debt
- Benefits / Tax Credit overpayments as a result of fraudulent claims
Mortgage and Car Finance shortfalls can be included in bankruptcy. This debt has become unsecured as the property it was secured against has now been repossessed.
Can Joint Debts or Guarantor Loans be included in Bankruptcy?
Bankruptcy is an individual debt solution. The debts in your name are included but debts in your partner or spouses name are not. This can cause a problem if you have joint debts.
As long as they are unsecured any joint debts you have must be included in your bankruptcy. However the other party remains liable for 100% of the outstanding balance. If they cannot afford to maintain the payments themselves they may then have to implement their own debt solution.
Most guarantor loans are unsecured debts. As such these must also be included in your bankruptcy. As a result the loan company will then require the guarantor to pay the debt in full. Legal action can be taken to enforce this.
Where you have joint debts or guarantor loans it is important to consider the impact on the other named person or guarantor before going bankrupt.
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