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What is Bankruptcy?

Bankruptcy is a legal process that you can enter into when you are unable to pay your debts. It is normally chosen as a last resort, but for some it can be seen as a new start. You can enter into Bankruptcy yourself, or if you have debts of over £5,000 your creditor/s can apply to make you Bankrupt.

In Bankruptcy your assets are sold off and the proceeds distributed to your creditors, in order to pay off as much of your debt as possible. If you have surplus income after your monthly living expenses have been paid, you could have to make payments out of your income for up to 3 years. At the end of your Bankruptcy your creditors cannot make any further claims against you for the debt.

Read on to find out more about Bankruptcy or fill in the form and one of our advisors will contact you to advise on your debts.

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Bankruptcy Questions and Answers

You can be made bankrupt in two ways. You can declare yourself bankrupt or a creditor that you owe more than £5,000 to can apply for your bankruptcy.

In order to declare yourself bankrupt you must fill out a detailed application formwhich includes your petition for Bankruptcy and a statement of affairs. You submit your forms to the court along with the Bankruptcy fees that are required (Fees are currently in the region of £700 in England and Wales and £640 in Northern Ireland).

  • Bankruptcy provides peace of mind
  • You could be discharged (released) from your Bankruptcy after as little as 1 year.
  • Debts are written off (with some exceptions).
  • You are protected from your creditors taking any further action, unless debts are secured against an asset.
  • You may be able to avoid selling your home providing a partner or relative can buy your share of it's value after any debts secured on it have been paid.
  • Your Bankruptcy is advertised in the local press and is entered on a public register.
  • If you rent your landlord may be notified or find out about your Bankruptcy.
  • If you apply for your own Bankruptcy you will be expected to pay a court fee and deposit.
  • Your employment may be affected.
  • In some occupations your employment may be at risk. i.e. You cannot be a company director, you may not practise as an Accountant/Lawyer/Justice of the Peace/Member of Parliament, you cannot take part in the promotion, formation or management of a limited company (LTD) without permission from the court.
  • You cannot act as a director of a company or be involved in it's management unless the court agrees to it.
  • You cannot trade in any business under any other name unless you inform all persons concerned of the bankruptcy.
  • You lose control of your assets.
  • You cannot obtain credit for over £500 without disclosing that you are bankrupt.
  • Your credit rating will be affected for many years after the Bankruptcy has taken place.
  • Certain debts cannot be included in the Bankruptcy - Student Loans, Fines and debts arising from family proceedings.
  • If you own a business, it will be closed down.
  • You may have a BRO (Bankruptcy Restrictions Order) made against you if you have behaved irresponsibly, recklessly or dishonestly.

Yes, there may be an alternative to you having to go Bankrupt. You could be suitable for other formal Insolvency solutions such as an IVA or a Debt relief Order. Or maybe an informal solution such as Debt Management might help you get through your financial difficulties. Talk to us to find out more about your alternative options to going bankrupt.

If you were made Bankrupt on or after April 1st 2004, you will be automatically discharged (freed) from Bankruptcy after a maximum of 12 months. This can be shorter if the Official Receiver/IP concludes their 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.

People may find out. Bankruptcy Orders are advertised in the London Gazette and also in your local newspaper. Your details will be placed on a Bankruptcy Register which is maintained by the Department of Trade and Industry and The Insolvency Service. The Register is a public document and can be viewed by the public on the internet.

Anyone who you have been involved with financially will be informed of your Bankruptcy. This includes, Banks, Building Societies, Mortgage Companies, Loan Companies, HP Companies, Your Landlord, Creditors and any Pension and Insurance Companies.

If your debts are serious enough that you are considering the prospect of going bankrupt, you need to be aware that there are charges for declaring yourself bankrupt. These being a £180 court fee and a £525 deposit to help meet the costs of the Official Receiver. This could mean total costs of £705 which you are legally bound to meet yourself. The fees are slightly different in Northern Ireland: £115 for the court fee and £525 for the deposit (also a solicitors fee of £7.) A total of about £640.

If you are on means-tested benefits, then you will be exempt only from the court costs, but not the deposit. This is another reason why it's so important that you get debt help and consider all other possible debt solutions such as an IVA (Individual Voluntary Arrangement) first.

Note: If you are married separate bankruptcy fees will apply. *These fees are correct at time of publishing on our website.

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.

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.

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.

If you feel you might need Bankruptcy Advice, you can discuss it with us at Debt Advice further, in confidence and for free. If you feel you need more information on other Debt Solutions please see the links below or contact Debt Advice on freephone 0800 043 5133.

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