Bankruptcy
- What is bankruptcy
What is bankruptcy
Bankruptcy is essentially a declaration to your creditors
that you cannot afford to repay your debt . Once a bankruptcy
order has been made your creditors will not be able
to contact you directly again. New regulations in bankruptcy
effective from the 1st April 2004 will allow for automatic
discharge from bankruptcy within 12months. You will
be required to make payment towards bankruptcy debts
for a total of 3 years after the bankruptcy order has
been made.
How can I bring about my own bankruptcy
We can assist you in applying for your own bankruptcy.
The procedure involves you completing a set of forms,
making an appointment at your local county court where
your bankruptcy application can be presented to the
court. Once consideration has been given to your application
by the court clerk, an Order is made and the Official
Receiver is appointed in the first instance to manage
your financial affairs and to take over negotiation
with your creditors. The Official Receiver may appoint
a Trustee in Bankruptcy to take over the management
of the bankruptcy. This usually happens when there are
assets, which can be recovered for the benefit of your
creditors.
What are the consequences of bankruptcy
The disadvantages of bankruptcy are that any assets
you have at the time of your bankruptcy will vest in
the Official Receiver. If you own your own house and
there is equity in it the Official Receiver through
the appointment of a Trustee in Bankruptcy will take
steps to take possession of our house and sell it so
that any equity can be released to the creditors and
help to pay the costs of administering your bankruptcy.
Secondly any policies you have will vest in your Official
Receiver as well. This will include any ISA’s
unit trusts endowment policies. Whilst a Trustee can
not take any sums out of a pension policy for the benefit
of your creditors it is important to note that if you
have a works pension policy if you file for bankruptcy
your entitlement to a payment out of the policy on retirement
may be affected. Whether or not this is the case can
be ascertained from reading the small print in your
pension policy. We can help you with this.
In addition, people often think that by filing for
bankruptcy they do not have to repay their debt. This
is not the case. The Official Receiver can expect you
to make income payments for 3 years. He /she will assess
what surplus income you have each week/month and expect
that you pay that sum for the benefit of your creditors.
There are also drawbacks from the point of view that
the circumstances surrounding how the debt was incurred
will be investigated by the Official Receiver. In some
circumstances the Official Receiver may apply to the
court for a Bankruptcy Restriction Order. This would
prevent you from being automatically discharged within
the 12 month period. Non co-operation could also result
in a bankruptcy restriction order which may prevent
you from being discharged for up to a maximum of 15
years. For the duration of the bankruptcy order you
will not be able to obtain credit over £500 or
act as a company director.
There are also some jobs that you would not be able
to undertake if you were made bankrupt. Some employers’
frown on bankruptcy and it may be a term of your contract
that you are solvent. If this is the case then there
is a chance that you will lose your job as well. If
you are concerned about any of these disadvantages then
please contact us for further advice. Bankruptcies are
advertised in local newspapers and in the London Gazette.
You will find it very difficult indeed to operate a
bank account whilst you are bankrupt.- there
are alternatives!
What are the advantages
The advantages of bankruptcy are that the creditors
will not be able to make contact with you or make demands
for payment directly. Once the order has been made you
can look forward to being debt free within 3 years with
the potential for the bankruptcy order to be discharged
within 12 months.
Can creditors make me bankrupt?
Creditors can apply to the court for a bankruptcy order
to be made against you. This is a totally separate procedure
to that of you applying for your own bankruptcy. Creditors
are usually likely to take this step if you have assets
which the creditors can require to be sold to repay
the outstanding debt or where by the issuing of the
petition then the creditors feel that they can improve
their prospects of receiving payment in full for the
outstanding amount.
The procedure for this is that the creditors usually
have to apply to the court for a judgement. Then the
creditor will instruct enquiry agents to arrange for
service of a Statutory Demand. This is the start of
the process. You then have 19 days in which to make
an application to the court for the statutory demand
to be set aside. If this time lapses and no application
is made then in those circumstances a bankruptcy petition
can be presented.
Fed up with endless debt management - considering
bankruptcy?
You are not alone. Contact
us and we will let you know within 2 or 3 minutes
if this is appropriate for you. Telephone us for free
advice now on:
0800 195 1113.
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