Bankruptcy faqs | Debt Advice

What is Bankruptcy?

Bankruptcy is the term given to an indivdual or a company that is unable to pay any of their debts. You can enter into Bankruptcy yourself, or a creditor that you owe more than £750 to can apply to make you Bankrupt. Bankruptcy allows you to become totally free of your debt, allowing you to start afresh. However, it is not without consequnece; all your existing assets are taken from you and are divided and given to your creditors.

Who can go Bankrupt and how?

Anyone or any company can go Bankrupt. A petition is presented to your local county court either by yourself (known as a debtors petition) if you or making yourself bankrupt or by your creditors (kown as a creditors petition) if they are making you bankrupt. When the petition has been presented the court will then make a Bankruptcy Order.

Will people find out if I go Bankrupt?

When a Bankruptcy Order is made against you it is advertised in the London Gazette and also in your local newspaper. Your details are also placed on a Bankruptcy register which is maintained by the Department of Trade and Industry and The Insolvency Service. The Bankruptcy register is a public document and can be viewed by anyone online.

Any of your banks, creditors, building societies, mortgage lenders and anyone else you have been involved with financially will also be notified of your Bankruptcy. Also, pension and insurance companies.

What about my job?

Depending on what your job is, you may not be safe. There are a number of roles that may be at risk if you are thinking of Bankruptcy. Basically, if you are a member of a professional body, you may need to check your membership.

What will the restriction be on me, as a Bankrupt?

The following are criminal offences for an undischarged bankrupt:

  • obtaining credit of £500 or more either alone or jointly with any another person without disclosing your bankruptcy. (Note: this is not just borrowing money - it includes your getting credit as a result of a statement or conduct which is designed to get credit, even though you have not made a specific agreement for it. For example, ordering goods without asking for credit and then failing to pay for them when they are delivered); 
  • carrying on business (directly or indirectly) in a different name from that in which you were made bankrupt, without telling all those with whom you do business the name in which you were made bankrupt; 
  • being concerned (directly or indirectly) in promoting, forming or managing a limited company, or acting as a company director, without the court’s permission, whether formally appointed as a director or not. 

You may not hold certain public offices. You may not hold office as a trustee of a charity or a pension fund.

After the bankruptcy order, you may open a new bank or building society account but you should tell them you are bankrupt; they may impose conditions and limitations. You should ensure you do not obtain overdraft facilities without informing the bank that you are bankrupt, or write cheques which are likely to be dishonoured. Tell your trustee about any money that you have in the account which is more than you need for your reasonable living expenses. Your trustee can claim the surplus amounts to pay your creditors.

What happens in court?

The first step is to complete all the necessary forms with a fee. These will petition the bankruptcy clerk for you to become Bankrupt, with the County Court that has Jurisdiction for Bankruptcy in your local area.

You will then get an appointment from the Bankruptcy Clerk for when your application for a Bankruptcy Order will be heard. On some occasions this will be on the same day as your petition. At the hearing appointment the the court will do one of several things, as outlined below:

  • Stay or postpone the proceedings - usually because more information is needed.
  • Dismiss your petition.
  • Appoint an Insolvency Practitioner if an Individual Voluntary Arrangement (IVA) seems to be more suitable than Bankruptcy.
  • Grant your petition if it seems that Bankruptcy is your best option for your circumstances.

How long does Bankruptcy last?

If you were made Bankrupt on or after April 1st 2004, you will be automatically discharged (freed) from Bankruptcy after a maximum opf 12 months. This can be shorter if the Official Receiver/IP concludes is enquiries into your affairs and files a notice in court. The length of your Bankruptcy can be altered in the following circumstances:

  • The court annuls the order on the grounds that all the debts have been paid in full
  • The court annuls the Bankruptcy on the ground that the original order was not appropriate
  • The discharge has been suspended as a result of failure to co-operate with the Official Receiver or Trustee. Once the breach has been rectified will the 12 month period continue.

Please note: Even though your Bankruptcy can be discharged within a year, the effects of Bankruptcy may go on for much longer. i.e. Your credit rating may be affected.

Other Debt Advice faqs

- Unsecured Debt faqs
- Secured Debt faqs
- Administration orders
- Debt Management Plan faqs
- IVA/CVA faqs
- Trust Deed faqs
- Sequestration faqs
- Other/General Debt faqs

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