Bankruptcy
In some instances, Bankruptcy can still be the best method of freeing a debtor from unmanageable debt.
Bankruptcy is a formal insolvency procedure for someone who is unable to pay their debts as they become due. It is often the last option to be considered when all other options have proved to be impossible or inappropriate.
It is possible for an individual to petition for his/her own Bankruptcy. Alternatively, a creditor may take that action. Once a Bankruptcy Order is made, the debtor is required to provide full details of his/her financial life to the Official Receiver who will assess their ability to make contributions to their creditors from either assets or income.
How do I petition for my Bankruptcy?
Go to www.insolvency.gov.uk and follow the link 'Do It Online' from the home page.
How much will it cost?
You may have to pay 3 fees when you take your petition and statement of affairs to court:-
- Court fee of £150. In some circumstances the court may waive this fee, if for example you are on Income Support.
- Deposit of £345 towards the costs of administering your bankruptcy. This is payable in all cases.
- Fee to swear the statement of affairs of £7
If you are a married couple and are both applying for bankruptcy, you will each have to pay separate fees.
The fees must be paid in cash, postal orders or a building society cheque.
A Bankruptcy Order can be obtained by any creditor owed more than £750.
Bankruptcy means that your assets are sold and the money is used to pay your creditors as much as possible. The assets will be sold by your Trustee. Assets you will be allowed to keep include:-
- Ordinary household contents
- A modest motor vehicle
- The benefit of a residential tenancy
- Tools of your trade
- Any money you have in a pension fund
There are special rules regarding your home
If there is equity in your home, even if it is jointly owned it will have to be dealt with within three years.
The Trustee will be happy to discuss how to avoid a forced sale of the property, for example by selling your share to the joint owner/friend/relative.
If the value of the equity is less than £1,000 the Trustee won't be able to sell it at all.
If you have any surplus income above the needs of you and your dependants, you are expected to make contributions to your creditors for up to three years. If you come into any money during the Bankruptcy i.e. lottery win/inheritance, that too will be available to your creditors.
In most cases, you will receive your discharge from bankruptcy after one year, or sooner, if the Official Receiver decides to close his file early. The slate is then wiped clean and the creditors in your bankruptcy can make no further claims against you.
Restrictions in Bankruptcy
The following are criminal offences for an undischarged bankrupt
- Obtaining credit of £500 or more, either alone or jointly with any other person, without disclosing your bankruptcy.
- Carrying on in 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.