The effects of Bankruptcy

Before you take any action to apply for your own bankruptcy, you should seek expert advice about bankruptcy and the other options available to you. The Insolvency Service and the courts cannot advise you on specific insolvency problems; for example, whether you should go bankrupt.

Once you have been made bankrupt all assets belonging to you come under the control of the Trustee, including your home. If you live with a partner and/or children then a period of twelve months may be allowed for other living arrangements to be made. At the end of the twelve-month period, the property will almost certainly have to be put up for sale, enforced by a Court order if necessary. If you own the property with someone else they may be able to make an offer to buy out your interest in the property from the Official Receiver. The other main disadvantages of bankruptcy are the restrictions placed upon you and the stigma of having to declare oneself as a bankrupt for certain transactions.

Bankruptcy is just one of several options to be considered when you cannot repay your debts. If you are ever faced with the prospect of bankruptcy you should always look at alternatives as soon as possible such as an Individual Voluntary Arrangement or a Debt Management Plan.

Bankruptcy can free you from overwhelming debt to give you a fresh start on your finances, however it is a serious commitment and should not be entered into lightly. Make sure bankruptcy is the right option for you.

A bankrupt may not:

• Obtain credit of £500 or more alone or jointly with another person without disclosing his or her bankruptcy
• Conduct business directly or indirectly in any name other than that in which he or she was made bankrupt
• Be involved directly or indirectly in promoting, forming or managing a company without the Court’s permission
• Hold certain public offices

When a bankrupt is discharged these constraints are ended. A bankrupt may open a new bank or building society account but should disclose the fact that they are bankrupt. The bank or building society may then impose conditions and limitations. Overdraft facilities or chequebooks must not be obtained, as they are likely to be dishonoured. The bankrupt must inform the Trustee of any funds available in the account, which exceed the normal living expenses, in order for the Trustee to distribute among the creditors.

What can I keep if I’m bankrupt?

You can keep any tools, books, vehicles (if low value) and other items of equipment needed personally in your employment or business. You will also be able to keep your clothing, bedding, furniture and basic household items.

Are you sure declaring bankruptcy is the only option?

But before you apply for bankruptcy make sure you’re certain you’ve considered the following questions:

• Would an IVA help me in my situation?
• Could a Debt Management Plan solve my problems?