Once bankruptcy has been declared it is the courts that decide how much you can and will repay. All of your possessions can be sold to cover the debts and any businesses you own will be shut down and the employees dismissed. You may lose your home (depending on your individual case) but, on the positive side, it does enable you to get out from under the burden of debt more quickly.
If you have declared bankruptcy you will be barred from certain professions and will find it very difficult to obtain credit in the future.
If you have debt problems and are thinking about the possibility of bankruptcy it is important to understand what bankruptcy is, and the alternatives to it. You MUST seek advice (much of it can be completely free and confidential) from professional money advice or debt counselling agencies.
The bankruptcy process will:
- free you from overwhelming debts so you can make a fresh start, subject to some restrictions
- make sure your assets are shared out fairly among your creditors.
Anyone can go bankrupt, including individual members of a partnership. There are different insolvency procedures for dealing with companies and for partnerships themselves.
The bankruptcy process can be instigated either:
- Voluntarily - By the debtor themselves.
- Involuntarily - By the creditor owed money (£750 Minimum).
- The supervisor or anyone bound by an IVA
If you owe at least £750, any creditor can apply for you to be made bankrupt.
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 is made is both difficult and expensive.
The Implications Of Bankruptcy:
- You lose control of your assets to a Trustee - this person is either the Official Receiver (a civil servant and officer of the Court), or a licensed insolvency practitioner. Your assets (house, cars and personal belongings) including personal ones and jointly owned ones can be sold to pay off your creditors.
- Utility companies will almost certainly require you to pay a security deposit, or use a prepayment meter.
- You must declare your status as a bankrupt, until you have been discharged (when the order and all restrictions have been lifted which normally takes 3 years) when seeking credit of more than £250.
- The bankruptcy order will be advertised locally.
- If you have made any gifts or sold assets at below their true value in the previous 5 years, these could be reclaimed for your creditors if you were insolvent at the time you made them.
- You are disqualified from being a company director until you have been discharged and there are some other positions you may not take during the period of bankruptcy.
Bankruptcy should be a last resort when you are facing debt problems.
