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Bankruptcy
Guide to Bankruptcy.
This guide will look at Bankruptcy. The first thing to know is that Bankruptcy relates only to an individual, this can be indirectly through your business, but ultimately it is you that has become bankrupt.
So how do you become Bankrupt?
This can happen in two ways.
1 Voluntary Bankruptcy - you can apply to become bankrupt through the courts and we will look at that later in the guide.
2 People you owe money to, 'your creditors' can apply to make you bankrupt, you must have a debt outstanding of £750, and this must follow a process and has implications on the recovery of the debt.
So what happens when you are made bankrupt?
There are a number of restrictions placed upon you; your details will be published on the bankruptcy register, sometimes called the 'Individual Insolvency Register', which is a public register of individuals that have been make bankrupt, and details such information as the date the individual will be free from the bankruptcy arrangement.
You will need to follow the Bankruptcy restrictions
If you do breach these restrictions you will have committed a criminal offence.
The Bankruptcy restrictions apply for 12 months from the date of Bankruptcy.
Any assets you own can be sold to repay debts.
Voluntary application for Bankruptcy.
You cannot just decide for yourself that you are Bankrupt, you will have to apply to the courts and they will decide if you are Bankrupt or not.
You should not consider Bankruptcy as the best option for you without first exploring the other options available to you, such as voluntary arrangements or debt relief orders.
If you decide that Bankruptcy is the way forward you must submit the forms to the court. These are forms 6.27, 6.28 and the guidance notes will come in handy to complete the forms.
The CAB may be able to give guidance in how to finance a Bankruptcy order, but the fees will have to be paid and the present costs are £525 and £175, these are the costs to manage the Bankruptcy and the fees to the court. You can find your local court online.
So what happens to my assets?
These will be seized and sold, the trustees, the people responsible for handling your bankruptcy, will manage this process. The process will normally start a couple of weeks after the court order and you will be interviewed by the trustee.
The purpose of the interview is for them to fact find; they will need information about your assets and your debts, your circumstances, and will give any guidance and information about the ongoing process.
They will not take everything, for example anything to run your home or work, but if you have a super computer that is worth thousands then that may be sold and an acceptable replacement found.
Your Bank account will be frozen, but you may be able to obtain money for food etc.
Your pension can also be effected but speak to your trustee about this.
Your home is often your biggest asset and this may have to be sold to repay your debts, and the trustee can do this to obtain your share of any equity; consideration must be given by the trustee for children and this can cause delays.
If you are renting, the fact you have now become Bankrupt can affect your agreement with your Landlord, once again check your agreement.
Future Income.
You may be subject to an order to pay an amount each month to repay your debts from your income; this order can be in force for 3 years, and this amount will be decided based upon your affordability.
So what happens when Bankruptcy ends?
Providing that you have complied with the bankruptcy you will be 'discharged' 12 months after the court order - this can be extended if you do not fully comply.
This process is automatic and you will not be informed; if you would confirmation in writing you can ask the trustees, and in some cases a fee will apply.
You can check with the register online to make sure you have been removed (this can take up to 3 months), but credit reference agencies will keep details for longer.
Alternatives to Bankruptcy.
There are a number of alternatives to managing your debt problems; we recommend that you speak to a solicitor before embarking on a solution.
Debt Management Plans (DMP):
Individual Voluntary Arrangements (IVA)
Debt Relief Orders (DRO)
Useful Telephone numbers
CAB
Wales call 08444 77 20 20
England call 08444 111 444
National Debt Line
0808 808 4000
Monday to Friday 9am to 9pm
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