Bankruptcy

Bankruptcy

Bankruptcy is a formal process where you legally declare your incapacity to repay your debts. While often seen as a "last resort" debt resolution, it offers the opportunity for a fresh start, enabling you to become debt-free within 12 months.

Bankruptcy carries significant consequences that warrant careful consideration, especially since alternative debt solutions may exist. It's important to note that you can initiate bankruptcy by declaring yourself bankrupt, known as a Debtors Petition. Alternatively, if you owe more than £5,000 to a creditor, they may pursue bankruptcy against you, termed as a Creditors Petition.

Advantages of Bankruptcy

It offers a fresh start.

You may become debt-free within 12 months.

Creditors are prohibited from taking further action, unless debts are secured against your property.

Bankruptcy could discharge all your unsecured debt (exceptions outlined in Q&A below).

You might avoid selling your home if your spouse, partner, or a relative can purchase your share of its value, after settling any secured debts.

Disadvantages of Bankruptcy

Your bankruptcy is publicly recorded and advertised.

Some debts may survive your bankruptcy (exceptions detailed in Q&A below).

You cannot hold a position as a company director without court permission.

A bankruptcy record remains on your credit file for six years.

Certain professionals may be prohibited from practicing if declared bankrupt.

You cannot obtain credit exceeding £500 without disclosing your bankruptcy status.

Any surplus income exceeding £20 may be subject to an Income Payments Order, requiring payments to the Official Receiver (OR) each month for 3 years.

Avoid Bankruptcy

If you are being made Bankrupt or you are struggling with your debts and think Bankruptcy is your only option, there may be a better alternative for you. There are a range of Debt Solutions available in the UK that could be more beneficial for your situation than Bankruptcy.

The alternative debt solutions available range from informal agreements such as a Debt Management Plan, to more formal agreements such as a Debt Relief Order, IVA or Trust Deed (for residents of Scotland). There are also more alternative solutions such as Remortgaging and/or Debt Consolidation for those of you who are homeowners.

No Debt Solution should be entered into lightly. You want to make sure you are opting for the best choice for your situation. The best way to find out all of your options is to speak to one of our experienced Debt advisors, who will do an analysis of your current situation, including your debts, incomings, outgoings etc... They will then go through ALL of your options and suggest what is best. It is then up to you to think about how you would like to proceed.

We could help you to:

Reduce your monthly debt repayments to something more manageable
Get a percentage of your debts written off
Avoid Bankruptcy
Avoid Repossession

FAQ's - Bankruptcy

Here are some common questions frequently asked about Bankruptcy. If you have any inquiries, please don't hesitate to contact us, and we'll be happy to provide the information you need.

What is Bankruptcy?

Bankruptcy is a legal process where you are declared unable to pay your creditors. You can petition for your own bankruptcy (Debtor's Petition) or a creditor/s can petition (Creditor's Petition) for your bankruptcy if who you owe them more than £5,000.

It costs £680 to go Bankrupt yourself. If you are interested in Bankruptcy you can seek further information on the Insolvency Service website.

What happens when I am made bankrupt?

When a Bankruptcy Order is made against you your case will usually be handled by an Official Receiver who works for the Inslovency Service. They will review the information and contact you within 2 weeks of the order being made. You must ensure that you cooperate fully with the Official receiver and provide any information that they require. You will also be required to attend an interview with the OR. This can be conducted in person or by telephone. They will determine if there is any money available for creditors and discuss how they propose realising this money.

Will I lose my home?

If you have any equity in your home, the Official Receiver or the Trustee (if an Insolvency Practitioner has been appointed in place of the Official Receiver) may have to sell your home to help pay your bankruptcy debts.

Your husband, wife, partner, a relative or friend may be able to buy your beneficial interest in the home. This will stop the Official Receiver or Trustee selling your home.

Beneficial interest is your interest in the proceeds of sale of the property. If there are joint owners, the beneficial interest is usually an equal share.

What happens if I rent my home?

The Official Receiver or Trustee can only take into account assets in your name. You must ensure you maintain your rental payments and adhere to your tenancy agreement or your landlord can take action against you.

What debts are not included in Bankruptcy?

There are some debts that are not included and will not be written off on the completion of your bankruptcy. These include

Court fines
Any debts obtained fraudulently
Any debts owed under family proceedings, unless otherwise directed by the court
Any outstanding student loan debts
Damages for personal injuries owed to anyone, unless otherwise directed by the court

Will I lose my personal belongings?

When you are declared Bankrupt you are allowed to retain your personal belongings which you require for essential everyday use, such as white goods, television, tables, chairs sofa etc... Any assets deemed to be of value and not essential may be seized by the Official Receiver and sold for the benefit of your creditors.

What will happen to my bank account?

When the bankruptcy order is made, you must immediately stop using your cheque books and bank cards and hand them over to the official receiver as soon as possible.

All your bank accounts will usually be 'frozen' by the banks when they become aware of the bankruptcy order - so you will need to make alternative arrangements for your income and essential direct debits.

After the bankruptcy order, you may open a new bank or building society account, however you need to disclose that you are bankrupt. It is at the discretion of the bank or building society whether they will let you operate a bank account, and they may impose conditions and limits.

Explore Your Alternatives

Prior to considering bankruptcy, it's advisable to explore alternative debt solutions like an IVA, Debt Relief Order, and Debt Management. For comprehensive information on all available options, please reach out to our Debt Advisors at 0799 955 9004, who are ready to address all your queries.