Bankruptcy

Bankruptcy is one way of dealing with debts you can’t pay but should, in most cases be a very last resort, particularly if you own a property and wish to protect it. Your assets can be used to pay your creditors and, subject to certain restrictions you are discharged from your debts after a period of time.

There may be other, more appropriate ways to deal with your debts including an IVA. It is very important that you get professional debt advice so you fully understand the consequences and stigma and how it can affect your home, business and credit rating.

You may be made bankrupt if:-

1. You apply to make yourself bankrupt
2. A creditor petitions to make you bankrupt through the Courts because you owe that creditor more than £5,000 and they follow the correct procedure
3. You  are a tenant or a homeowner
4. You have assets but no monthly surplus income after the payment of normal domestic expenditure

Advantages of Bankruptcy

1. From 6 April 2016 it is much easier to apply for bankruptcy through an on-line service
2. You will not have to fill out paperwork
3. You will not have to attend Court
4. An Adjudicator will give you a decision on your bankruptcy application
5. If a creditor petitions for your bankruptcy they will pay the bankruptcy costs
6. You may be able to contact Charities through the Citizens Advice Bureau to help with the costs of bankruptcy if you decide to apply to make yourself bankrupt.
7. Your bankruptcy is likely to last for 12 months at which time you will be discharged

Disadvantages of Bankruptcy

1. The costs of applying for bankruptcy are much higher than a DRO.
2. Currently the costs for petitioning for your bankruptcy on-line are £130 payable to the Adjudicator and £525 payable to the Official Receiver and need to be paid when you are applying on line
3. The bankruptcy fees and costs incurred by the Official Receiver and Trustee in Bankruptcy are considerable and, in some cases, can be disproportionate to the level of debt which should be taken into account where there is equity in a property.
4. The costs of the petitioning creditor will be paid from your bankruptcy estate in addition to any debt due to them
5. Statutory interest may apply on the debts
6. The Bankruptcy Order is entered onto a public register
7. Ownership of all your assets (save for normal domestic goods) will pass to your Trustee in Bankruptcy whose main job will be to realise them for the benefit of creditors
8. Your equitable share in any property will need to be released or the property will be sold even if it is jointly owned or there are children living in the property (generally 12 months after the making of the Bankruptcy Order)
9. If you have any after-acquired assets or additional assets which come to light during your bankruptcy term for example inheritance monies or PPI redress to which you become entitled, this must be paid without deduction into your bankruptcy estate
10. The Trustee in Bankruptcy has wide powers to investigate your financial affairs and apply to the Court to overturn prior transactions, subject to various time limits and conditions.
11. You will be committing an offence if you obtain credit of more than £500 or more without disclosing that you are the subject of a Bankruptcy Order
12. Your employment may be affected
13. You may have a Bankruptcy Restriction Order made against you for 2 to 15 years if you acted irresponsibly, recklessly or dishonestly when obtaining credit
14. You will remain liable to pay certain debts, in particular student loans, fines and some debts arising from family proceedings
15. A Bankruptcy Order discharge date can be extended if you do not co-operate with the Official Receiver during the year that your bankruptcy is in force for a period of 5 years
16. You cannot act as Director of a limited company unless you obtain the consent of the Court
17. You cannot choose your Trustee in Bankruptcy
18. Your credit rating is affected

Disclaimer
X debt do not assist clients should they wish to apply for bankruptcy and you should seek advice from an independent regulated person at the Financial Conduct Authority. The above information is generic information and should not be constituted as specific advice to an individual.