What is Bankruptcy?
Bankruptcy is a solution to dealing with debts which you'll never be able to pay off. Bankruptcy is not a penalty, as some financial institutions would have you believe, it is a formal procedure which allows for a fresh financial start, freeing you from the anxiety that such a large debt holds over you.
Is Bankruptcy right for me?
Bankruptcy should be considered by those who are unable to meet your creditor's contractual demands when they fall due.
Going bankrupt, for many, means that control of your finances has been lost. One aspect of control is to understand exactly where all your money is going. Use our free SOA tool as a useful guide in understanding where all your money is going.
Bankruptcy - Pros v Cons
Pros
- You will be no longer be liable for any debts once you have been discharged from bankruptcy. However there are some exceptions to this eg Student Loans and court fines etc which will not be written off.
Cons
- Any of your assets can be sold. This includes your family home, your car and any of your household effects (if they are deemed to be of excessive value).
- Your situation will be advertised in the local press and the London Gazette.
- If you apply for credit in excess of £500 you will have to declare that you are an undischarged bankrupt
- Some occupations carry restrictions regarding being bankrupt. Many corporate employers carry out background searches - this could also mean that promotion prospects could be affected.
- You cannot act as the director of a company, until you have been discharged.
- You cannot take any part in the promotion, formation or management of a limited company without the permission of the court.
- You cannot trade in any business under any other name unless you inform all persons concerned of the bankruptcy.
- There may be restrictions on you practicing as an Accountant / Solicitor.
- If a Bankruptcy Restriction Order is granted:
- You cannot become a Member of Parliament.
- You cannot act as a Justice of the Peace (JP) or Governor of a School.
- You cannot become a member of the Local Authority.
Who regulates Bankruptcy?
The assets of the bankrupt individual fall under the control of a Trustee. This will be either the Official Receiver (a civil servant and officer of the Court), or a licensed Insolvency Practitioner, who can be appointed trustee instead of the Official Receiver. He or she is then responsible for disposing of your assets and making payments to your creditors. The DTI oversee the activities of IP's. If you wish to make any complaints about an IP then complain to their recognised professional body.
Alternatives To Bankruptcy
Bankruptcy is considered as the last resort. Other alternatives which should be considered before bankruptcy are
How to apply for Bankruptcy?
A court makes a bankruptcy order only after a bankruptcy petition has been presented. It is usually presented either:
- by yourself (debtor's petition); or
- by one or more creditors who are owed at least £750 by you and that amount is unsecured (creditor's petition).
A bankruptcy order can still be made even if you refuse to acknowledge the proceedings or refuse to agree to them. You should therefore co-operate fully once the bankruptcy proceedings have begun. If you dispute the creditor's claim, you should try and reach a settlement before the bankruptcy petition is due to be heard. Trying to do so after the bankruptcy order has been made is both difficult and expensive.
How long does it take to set up Bankruptcy?
It usually takes 2-3 months to setup.
What happens to my credit rating?
You may well be discharged from a bankruptcy after 1 year; however a note regarding your bankruptcy will remain on your credit file for 6 years.
Bankruptcy Fees - Who and how much?
Who?
The Official Receiver (an officer of the court) is involved in every bankruptcy. An insolvency practitioner may also become involved.
How much?
- £150 court fee. This may be waived by the court in certain situations eg if your are on income support.
- £335 deposit towards the cost of administering your bankruptcy. This is payable in all cases, however, there are some charitable trusts which will pay the deposit on your behalf in cases of severe financial hardship, and you should contact your local Citizens' Advice Bureau for details of such charitable Trusts in your area.
- Fee to swear the statement of affairs. In a county court no charge is made, but £7 is charged in the High Court or before a solicitor
Take control of your debt
Complete our SOA and get your finances back in control. Once you complete your SOA you'll find that you understand where the solution lies to your financial problems.
And remember - our forum is here to offer you help and advice whenever you need it.
Don't let your debts drive you down the highway of despair - take back the controls and get on the road to financial happiness.
Bankruptcy
Bankruptcy
