Bankruptcy is a very serious concern, not to be taken lightly. Most people who are declared bankrupt will be forced to sell everything that they own, including cars and homes. Additionally, any business owner made bankrupt will have to close down the business and not be able to be a company director in the future.
It is worth looking into alternatives to bankruptcy such as Debt Management Plans, IVA’s and Trust Deeds. One of these may be a better solution for you if you would be severely affected or if you are not in a dire situation.
There are situations where bankruptcy may be your only choice, which is why it exists. If you are unable to repay the debt in an amount of time deemed reasonable by your creditors, you may be left with very little choice.
What is bankruptcy?
Bankruptcy is a form of insolvency, it is similar to an Individual Voluntary Arrangement (IVA), but has some more severe consequences. Your debt will be written off, however, this will only happen after your assets and property have been sold to clear as much as possible.
You will need to contact a professional Insolvency Practitioner in order to begin the process.
The benefits of bankruptcy?
- After a year of bankruptcy, you will be discharged, and able to carry on with your life. There will be no comeback from the debts which were dealt with under the bankruptcy
- After the bankruptcy, you will be debt free.
The drawbacks of bankruptcy?
- Your assets, including your home and car, can be included and sold to raise money to repay creditors
- There are some professions you will be unable to work in: Armed Forces, Police Force, Local Council or Government. Some private sector employers may also carry-out checks on a potential employee’s credit rating
- You won’t be able to act as a director of a company
- You will need court permission to take any part in the management of a limited company
- If the Official Receiver believes it would help the investigation, members of your family, or employers could be scrutinised in court
- It may be difficult to obtain credit in future, as a record of the bankruptcy order stay on your credit history for up to six years
More Bankruptcy Information
Where are bankruptcy orders made?
Bankruptcy petitions are generally presented in the High Court in London or at a county court near where you live or work (bankruptcy petitions may not be dealt with at all local county courts).
Who would deal with your bankruptcy petition?
There are two people involved in most bankruptcy petitions. There are:
Official Receiver in bankruptcy
Official Receivers are people designated to protect your assets if you have any, if not they will act as trustee of your bankruptcy affairs.
Insolvency practitioner in bankruptcy
If you have any assets, like a house or car, an Insolvency Practitioner should be appointed to sell your assets to pay your creditors. After a bankruptcy order has been made against you, you can no longer be asked for payment from your creditors. All payments are handled by your insolvency practitioner.
How will being bankrupt affect you?
What will happen to your assets in bankruptcy?
Once you’re ‘bankrupt’, the Official Receiver, will sell your assets such as your car to pay your creditors. There are specific exclusions from this for items deemed necessary to live for example:
- equipment for your work like tools or vehicles
- household items needed by you and your family like clothing, bedding and furniture
If you are a home owner, you may be required to sell your property. This depends on who owns it, how much it is worth, and what equity you have.
What will happen to your earnings in bankruptcy?
When you are bankrupt The Official Receiver (after looking at your income and taking into account expenses such as your mortgage, rent and household bills) may decide that payments should be made to your creditors.
You can be asked to sign an ‘income payments agreement’ which will commit you to paying fixed monthly payments from your income for up to three years.
If your circumstances change, you’ll need to tell the Official Receiver, so they can review these arrangements.
Do you need to pay ongoing commitments in bankruptcy?
Yes. All ongoing commitments such as rent and mortgages must be paid.
How long will bankruptcy last for you?
Bankruptcy normally lasts for one year, although this may be different, get advice from a professional. Once this has passed, regardless of what you owe, your bankruptcy will be discharged.
Important Information About Our Service & Fees
Whilst we strive in all cases to negotiate the best deal with your creditors, we cannot guarantee a reduction in interest or charges. Also as one of the largest providers of debt management solutions in the UK, we are able to provide initial advice over the phone without charge, however, if a debt solution is taken out, please be aware that fees will be charged. We aim to keep these fees as low as possible and believe that we are very competitively priced, for detailed information on our fees, including examples for each product, please click this fees link.
Further Additional Information
What if you decide that I don't want to go ahead? - click here.
Will your credit rating be affected? - click here.
The insolvency service has produced a guide for people who are struggling with debt. This guide outlines each of the available solutions. You can download the guide by clicking the following link - In Debt? Dealing With Your Creditors.
If an IVA is not maintained it could lead to bankruptcy.