Should I tell my fiancée that I am an ex bankrupt?
One day last week my phone went off, it was an old client of mine called Steve: "Mike. I'm in love, due to get married, got a problem though". Muttering back something about being no agony aunt, Steve went on: he wanted to know if he should tell his fiancée that he had gone bankrupt 10 years ago. "Mmmm... do you think you need to?" I asked. Silence.
Steve came to me for debt advice many years ago after he had lost his job. No income and with credit card and personal loan debts of around £40,000 he had no other option.
Bankruptcy worked well for him, he cleared his debts and was now back in full time employment. His immediate problem was that he felt a failure and now thinks that the new girl in his life will think the same about his bankruptcy and dump him!
It's not a crime to be in debt
Many people I speak to see themselves as failures. I try to reassure them that they are not and that being in debt could happen to any one of us. I remind them that the last debtors' prison shut 141 years ago and that bankruptcy is a legal way of discharging unsecured debts. Many ex–bankrupts recover to take on full employment, pay income tax and national insurance and contribute to society.
Should he come clean?
So should Steve mention his bankruptcy? It's a difficult call as a lot depends on individual circumstances. In this particular case I would spill the beans and be upfront.
If your fiancée cannot accept what happened before you met, especially after you have been honest and open about your past, then you have to question the strength of the relationship. If a partner dumps you because you were once made bankrupt then I would take that as an early indicator to get the hell out of the relationship.
Will his fiancée find out anyway?
There is a good chance this may well happen. An example would be if they were to move in together in rented accommodation. The agents acting on behalf of the landlord would conduct a credit search on both Steve and his partner.
In Steve's case as the bankruptcy was 10 years ago it would not be on his credit file but in other cases bankruptcy would be on the file if it occurred under six years ago.
Anyone with a checkered credit history is usually asked to make a down–payment of a bond for between three to six months when renting a home. This means that if the rent is £800 per month then the deposit in advance would need to be between £2,400 and £4,800.
The matter is more complicated if applying for a mortgage. If after being granted the mortgage and it transpires that Steve had hidden the fact that he was a previous bankrupt, (there is usually a direct question asking if any of the applicants have ever been made insolvent in the past,) then clearly he has committed fraud.
Should we all be doing a financial check on any prospective partners?
In these days of pre–nup agreements, it's not surprising to hear of individuals snooping around to see what's on offer. More surprising – and alarming – is the fact that it is not difficult to do a check on someone. I can easily search on my neighbours, friends and any other individual so long as I have their name, and they would not even know I had done it.
A scheme originally established in 1944 to provide protection against sickness and unemployment as well as helping fund the National Health Service (NHS) and state benefits. NI contributions are compulsory and based on a person’s earnings above a certain threshold. There are several classes of NI, but which one an individual pays depends on whether they are employed, self-employed, unemployed or an employer. Payment of Class 1 contributions by employees gives them entitlement to the basic state pension, the additional state pension, jobseeker’s allowance, employment and support allowance, maternity allowance and bereavement benefits. From April 2016, to qualify for the full state pension, individuals will need 35 years’ of NI contributions.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
A person (or business) unable to pay the debts it owes creditors can either volunteer or be forced into bankruptcy – a legal proceeding where an insolvent person can be relieved of their financial obligations – but loses control over their bank accounts. Bankruptcy is not a soft option. Although it may wipe the financial slate clean, it is extremely harmful to a person’s credit rating (it will stay on your credit record for six years) and will adversely affect your future dealings with financial institutions. Bankruptcy costs £600 paid upfront.