What Will Happen To My Home

Will I lose my home?

The Official Receiver or the trustee (if an insolvency practitioner has been appointed in place of the Official Receiver) may have to sell your home to go towards paying your bankruptcy debts. This applies whether the home is freehold or leasehold and whether it is solely or jointly owned. Please note that if your home is mortgaged and you do not keep up your payments, your lender may be able to sell your home. You should consider contacting your lender about your bankruptcy and your mortgage payments.

When will the Official Receiver or trustee sell my home?

If your husband, wife or children are living with you, it may be possible for the sale to be put off until the end of the first year of your bankruptcy. This gives them time to make other housing arrangements. They should contact the Official Receiver or trustee dealing with your bankruptcy.

Can anything be done to stop the Official Receiver or trustee selling my home?

Your husband, wife, partner, a relative or friend may be able to buy your beneficial interest in the home. This will stop the Official Receiver or trustee selling your home later.

What is meant by my ‘beneficial interest’ in my home?

This is your interest in the proceeds of sale of the property as opposed to the legal title to the property which is held by the owner. If you are the sole owner, the beneficial interest is the whole value of the property. If there are joint owners, the beneficial interest is usually an equal share of the value. (If there are any amounts owed on mortgages or other loans secured on the home, these will be repaid from any proceeds of the sale.)

What happens to my beneficial interest and legal title to my home when I am made bankrupt?

Your beneficial interest always transfers to the Official Receiver or trustee. If your home is solely owned, the legal title usually also transfers to the Official Receiver or trustee. If the home is jointly owned, the legal title remains with you and the co-owner but this does not prevent the Official Receiver or trustee taking action in relation to the property.The Official Receiver or trustee has to realise (or sell) the beneficial interest to raise money to pay your creditors. One way of doing this is to sell the beneficial interest to your husband, wife, partner, a relative or a friend.

What should be done if someone wants to buy my beneficial interest?

If an insolvency practitioner is handling your bankruptcy, your husband, wife, partner, relative or friend should contact the insolvency practitioner for information on what to do.

If the Official Receiver is handling your bankruptcy, your husband, wife, partner, relative or friend should contact the Official Receiver. If the home is jointly owned, they may be able to take part in a low-cost conveyancing scheme run by The Insolvency Service and a firm of solicitors. Under this scheme, the beneficial interest and the legal title can be transferred to your husband, wife, partner, relative or friend. Please note that they will have to pay:

• for a solicitor or licensed conveyancer to act for them in the transaction;

• £211 (as at February 1999) to cover the Official Receiver’s legal costs. This amount must be paid in advance. It includes an allowance for expenses which may be incurred in the transaction. If the allowance is not fully used, they will receive a refund;

• the cost of an independent valuation unless you already have a very recent independent valuation of the property;

• the agreed purchase price for the beneficial interest based on the valuation. If your home is now worth less than the amount you still owe on it, the price of the beneficial interest will be set at £1

The purchaser will also have to give the Official Receiver up-to-date details in writing of the amounts which would be needed to fully pay off the mortgage and any other charges on the property. If your husband, wife, partner, relative or friend cannot afford the costs of the scheme at present, they may still be able to take part at a later date. They should contact the Official Receiver about this. If at a later date an approach is made to the Official Receiver to purchase the beneficial interest, and the property has increased in value, it is likely that the purchase price will be more than £1.If the home is mortgaged, the lender may have to agree to the sale – the solicitor or licensed conveyancer dealing with the transaction will be able to advise on this.

Can I buy the beneficial interest if I am sole owner of the property?

It is possible for the Official Receiver or other trustee to transfer the beneficial interest and legal title to you, your husband, wife, partner, a relative or friend but the transaction is more complicated. If you wish to proceed in this way, please contact the Official Receiver or trustee for further details.Please note that in this type of transaction, costs like those listed overleaf must also be paid (but there is no low-cost conveyancing scheme).

What happens if no-one buys the beneficial interest?

It remains with the Official Receiver or trustee. It does not return to you on your discharge from bankruptcy. The value of the beneficial interest may increase over time if the market value of your home increases. The benefit of any increase in value will go the Official Receiver or trustee to pay your debts, even if the home is sold some time after you have been discharged. You and your family will have to move out if the home has to be sold to pay your creditors

What happens if I rent my home?

If you fail to keep to the terms of your tenancy agreement, such as not paying your rent, the landlord may take action against you. The Official Receiver or trustee will normally have no interest in your home to sell for the benefit of creditors. In most cases the Official Receiver or trustee will need to tell your landlord that you are bankrupt. We suggest that you seek legal advice on what may happen under your tenancy.

Bankruptcy Annulment

What is an annulment of a bankruptcy order?

This is a procedure which cancels your bankruptcy order. An order of annulment can only be made by the court.

When can I apply for an annulment?

You can apply for an annulment at any time if:

• the bankruptcy order should not have been made, for example because the proper steps involved in obtaining the order were not followed; or

• all your bankruptcy debts and the fees and expenses of the bankruptcy proceedings have been either paid in full or guaranteed to the satisfaction of the court; or

• you have reached an agreement called an “individual voluntary arrangement” with your creditors to repay all or part of your debts.

How do I apply for an annulment?

If the bankruptcy order should not have been made (application under section 282(1)(a) of the Insolvency Act 1986):

• get an application form from the court dealing with your bankruptcy;

• make an affidavit (a written statement of the relevant facts which is sworn on oath or affirmed, usually before a solicitor) or a witness statement verified by a statement of truth saying why the bankruptcy order should not have been made;

• send or take the completed form and affidavit or a witness statement verified by a statement of truth to the court. The court will then set a date to hear your application, and you should attend the hearing;

• before the hearing: you must notify the Official Receiver, the person who petitioned for your bankruptcy and the trustee (if an insolvency practitioner has been appointed as trustee in place of the Official Receiver) of the date, time and place of the hearing. You should do this in sufficient time for them to attend the hearing. At the same time, you should send each of them copies of your application and affidavit or a witness statement verified by a statement of truth;

• soon after the hearing: the fees and expenses of bankruptcy will have to be paid. The court will decide who should pay them when it considers your application.

If all the bankruptcy debts and fees and expenses have been paid (or security has been given) (application under section 282(1)(b) of the Insolvency Act 1986):

• get an application form from the court dealing with your bankruptcy;

• make an affidavit or a witness statement verified by a statement of truth setting out details of your assets and debts at the date of the bankruptcy order and details of your payments made or secured;

• send or take the form and affidavit or a witness statement verified by a statement of truth to the court. The court will then set a date to hear your application, which you should attend;

• you must notify the Official Receiver and the trustee of the date, time and place of the hearing. You should do this at least 28 days before the hearing. You should also send copies of your application and affidavit or a witness statement verified by a statement of truth to the Official Receiver and the trustee;

• the Official Receiver or the trustee will send a report to the court to confirm that your debts have been paid or adequate security has been given to creditors. The report will also comment on your conduct in the bankruptcy.

If your creditors have agreed to an individual voluntary arrangement (application under section 261 of the Insolvency Act 1986):

• the insolvency practitioner nominated by you to deal with your case will call a meeting or your creditors;

• if your creditors agree to your offer to pay them, you can apply to the court for an annulment. This application can be made 28 days after the chairman of the meeting of creditors has reported the results of the meeting to the court

• application to annul the bankruptcy order may be made by the supervisor of your voluntary arrangement, or you may make that application yourself. The application should be made using the same procedure as applications where the bankruptcy order should not have been made, except that the affidavit or a witness statement verified by a statement of truth accompanying the application should state that an voluntary arrangement has been approved by your creditors as the grounds on which the application is being made.

If I apply for an annulment, do I have to keep my appointment to see the Official Receiver?

Yes. You should go to the Official Receiver’s office and provide any information you are asked for. The court might not annul the bankruptcy order until the Official Receiver confirms that you have done so.

Can I stop the bankruptcy order being advertised?

Yes, but you must act immediately. If you have applied, or you think you will be able to apply, for an annulment, you may be able to apply to the court for a “stay of advertisement”. But this should be done at once. You should telephone the court and state that you wish to apply for a stay. You should also inform the Official Receiver that you are making this application. The Official Receiver must advertise the bankruptcy order in a newspaper and in “The London Gazette” (an official publication which contains legal notices). These actions can only be stopped by a court order.

What is the effect of the annulment of a bankruptcy order?

You will revert to your pre-bankruptcy status. Disposals of your property by the Official Receiver and the trustee will remain valid and will not be reversed. Any other assets will be returned. You will be liable for any of your debts that have not been paid in the bankruptcy.

The following paragraphs explain what will happen to public records of your bankruptcy:

• The Insolvency Service’s Individual Insolvency Register – The register which can be searched by post, fax or in person at your local official receiver’s office, records all bankruptcies in England and Wales.

If a bankruptcy order is cancelled because the debts have been paid or a voluntary arrangement has been approved, the record of the order will be removed from the register two years after the date of cancellation. If a bankruptcy order has been cancelled on the grounds that it ought not to have been made, or a voluntary arrangement has been revoked, the record will be removed from the register immediately.

• HM Land Registry – bankruptcy petitions and orders are registered at the Land Charges Department of HM Land Registry. The order of annulment can say that any registration of the petition or order at the Land Charges Department should be cancelled – you should ask the court to include it in the order. The order will also say who should contact the Land Charges Department to ask for cancellation – this will usually be for you to do.

The contact point is The Superintendent, Land Charges Department, Drakes Hill Court, Burrington Way, Plymouth PL5 3LP, telephone 01752 636000.

If you own property which is registered in your sole name, a creditor’s notice (to protect the rights of creditors) and a bankruptcy inhibition (to prevent dealings with the property) may also have been registered against the title to the property. If the property is registered in joint names, a caution (against dealings) may have been registered against the title.

You can apply in writing to the Land Registry office which serves your area to have these entries removed – in the case of caution, the Land Registry will have to serve notice on the Official Receiver or the trustee. Please enclose a copy of the order of annulment and, if possible, give the registered title number of the property.

If you do not know the address of the Land Registry serving your area, try your local telephone directory or contact HM Land Registry Headquarters, 32 Lincoln’s Inn Fields, London WC2A 3PH, telephone 020 7917 8888

• Credit Reference Agencies – the Official Receiver does not send any form of notice to credit reference agencies. The agencies pick up information from other sources such as advertisements of bankruptcies in newspapers, “The London Gazette” and the Register of County Court Judgments.

If no advertisement of your discharge from bankruptcy or the annulment of the bankruptcy order is made, separate information will have to be provided to credit reference agencies to amend their records.

Where a stay of advertisement has been granted after the bankruptcy order has been advertised, separate information will have to be provided to credit reference agencies to amend their records.

• Notifications – even if you have obtained a stay of advertisement, the Official Receiver will need to notify your creditors, bank, building society and others you have had dealings with of the bankruptcy. He or she will also notify them if the bankruptcy is annulled.

What is “discharge from bankruptcy”?

It is a process which frees you from the restrictions of bankruptcy and releases you from most of the debts you owed at the date the bankruptcy order was made against you.

Discharged From Bankruptcy

What is “discharge from bankruptcy”?

It is a process that frees you from the restrictions of bankruptcy and releases you from most of the debts you owed at the date the bankruptcy order was made. The Official Receiver can apply to court for a Bankruptcy Restrictions Order, which will mean that you continue to be subject to restrictions after discharge for the period stated in that Order. This will not affect the discharge of your debts.

When will I be discharged?

Usually after 12 months, but if the Official Receiver files a notice in court before that time to say that he has concluded his enquiries into your affairs, then you will be discharged when the notice is filed. If such a notice is issued in your case, a copy will be sent to you so that you will know when you are discharged. If you do not co-operate with the Official Receiver (or the trustee, if an insolvency practitioner has been appointed as trustee in place of the Official Receiver), then the court may be asked to stop your discharge from taking place. An example would be if you refused to provide information to the Official Receiver or the trustee. If your discharge has been suspended (stopped) before 1 April 2004, you should contact the Official Receiver for information about how and when you may be discharged from bankruptcy.

How do I get my discharge?

You will normally get your discharge automatically even if no payments have been made to your creditors. If you are discharged automatically, you do not have to do anything to get your discharge. If you wish, you can obtain a certificate of discharge. A certificate is not necessary in most cases, but if you need one you should write to the court that dealt with your bankruptcy. Do not write sooner than 2 weeks before your discharge date. Give your name, address and court number (to be taken from the latest correspondence about your bankruptcy).

The court will check with the Official Receiver that you are entitled to an automatic discharge. You should receive a certificate confirming your discharge within about 4 weeks.

A fee of £60 is payable to the court for issuing a certificate of discharge (further copies will cost £1 each). You can also ask for the Official Receiver to advertise your discharge, but you will have to pay the costs of this before it is done.

You will not get your discharge automatically:

• if your discharge period has been suspended, for example because you have failed to co-operate with the Official Receiver or trustee;

• if you are subject to a criminal bankruptcy order. Please contact the Official Receiver for more information.

What is the effect of the discharge?

Your debts – you will be freed from most debts that you incurred before the bankruptcy order. You will be able to obtain credit without having to mention your bankruptcy (unless you are specifically asked to do so) but you will want to ensure that you can repay it.

The debts you are not freed from include:

• any money owed under family court proceedings (for example, maintenance) or arising from any personal injury claims against you unless the court directs otherwise

• any court fines or debts arising from fraud or certain other crimes

• debts you incur after the bankruptcy order.

• since 1 September 2004, all outstanding student loans. If you were made bankrupt before 1 September 2004 you may still have to repay your student loan. Clarification should be requested from the Official Receiver.

Your mortgage payments – please note that secured creditors (lenders who hold security such as a mortgage for the money owed) still have the right to enforce or recover their security if payments are not met. You should consider contacting your mortgage lender about your mortgage payments and your discharge from bankruptcy.

Your assets – any assets that the Official Receiver or the trustee held or claimed during your bankruptcy remain under the control of the Official Receiver or the trustee. They are not returned to you on discharge. It may be some time after your discharge before all your assets, such as your home, are dealt with. Please note that, when your trustee makes a payment to your creditors, he may place an advertisement about your bankruptcy in a newspaper asking creditors to submit their claims. If it takes your trustee a long time to deal with an asset, this advertisement may appear several years after the bankruptcy order. If your home has not been dealt with in a certain period, usually 3 years from the date of the bankruptcy order, your interest in it may be returned to you. (There is a separate publication on what will happen to your home, which explains this more fully – see below.)

Your business – after discharge you can carry on a business without the restrictions that applied during your bankruptcy. You can act as a director of a limited company or be involved in its management (unless you are subject to a separate disqualification order).

Your obligation to co-operate with the Official Receiver and trustee – you must continue to assist the Official Receiver and the trustee, for example by providing any information requested, even after your discharge. If you do not, you could be liable to contempt of court.

The following paragraphs explain what will happen to public records of your bankruptcy:

1. The Insolvency Service’s Individual Insolvency Register – The Individual Insolvency Register contains records of bankruptcy orders and individual voluntary arrangements in England and Wales. The record of your bankruptcy will remain on the register for 3 months after the date of your discharge.

2. The Individual Insolvency Register is available online at www.insolvency.gov.uk.

3. For further information, a publication called ‘The Individual Insolvency Register’ is available from your local Official Receiver’s office or from The Insolvency Service website at www.insolvency.gov.uk or from the Insolvency Service Publication Order Line.

HM Land Registry – bankruptcy petitions and orders are registered at the Land Charges Department of HM Land Registry. These entries remain on the register for 5 years from the date of registration. Discharge has no effect on this. The Official Receiver or trustee can apply for entries to be renewed beyond the 5 years, for example if the discharge has been suspended. If you own property that is registered in your sole name, a bankruptcy notice (to protect the rights of creditors) and a bankruptcy restriction notice (to prevent dealings with the property) may also have been registered against the title to the property. If your interest in your home is returned to you, the trustee will notify the Chief Land Registrar that the property is no longer part of your bankruptcy estate. If the property is registered in joint names, a Form J restriction (against dealings) may have been registered against the title. Discharge has no effect on this.

Credit reference agencies – the Official Receiver does not send any form of notice to credit reference agencies. The agencies pick up information from other sources such as advertisements of bankruptcies in newspapers, “The London Gazette” and the Register of County Court Judgments. If no advertisement of your discharge from bankruptcy or the annulment of the bankruptcy order is made, you will have to provide separate information to credit reference agencies to amend their records. For further information, a publication called “No Credit?” is produced by the Information Commissioner’s Office – telephone 01625 545745.

What is “annulment of bankruptcy”?

This is a procedure by which a court cancels the bankruptcy order it has made. This can happen if it turns out that your bankruptcy order should not have been made or if all your debts and fees and expenses of the bankruptcy have been paid in full; or if your creditors accept proposals for settlement under a voluntary arrangement. See individual voluntary arrangement for more information

How do I obtain further information?

To obtain copies of the leaflet ‘Information on annulment of a bankruptcy order’, please contact your local Official Receiver’s office or or contact The Insolvency Service Publications Order Line on 0121 698 4241. You can also write to:

The Insolvency Service Publications Orders
Records Management
4th Floor East
Ladywood House
Birmingham
B2 4UZ

Official Receivers Office

Who is the Official Receiver?

The Official Receiver is a civil servant in The Insolvency Service and an officer of the court. He (or she) will be notified by the court of your bankruptcy. He will then be responsible through his staff for administering the initial stage, at least, of the insolvency case. This stage includes collecting and protecting any assets and investigating the causes of your bankruptcy.

What are my duties?

The Official Receiver’s staff will contact you immediately if they know that action is urgently needed in relation to your assets. Otherwise, they will contact you within 2 working days of receiving the insolvency order. Usually they will arrange an appointment for you to attend at the Official Receiver’s office for an interview, normally within 10 working days of receiving the order. If the Official Receiver does not require you to attend for an interview, you will be sent a letter setting out what is required of you. In both circumstances you will receive a questionnaire to complete. The more organised you are, the more straightforward the process will be. If you are asked to attend for an interview, before the interview, you should do three things:

• Telephone the Official Receiver to confirm the appointment if you have not already done so or if:

• You have any infirmity, disability or other difficulty which you consider may require special facilities when attending his office;

• Any matters need to be sorted out urgently;

• You need to rearrange the appointment; or

• You have a lot of paperwork or accounting records and need to have them collected.

• Fill in the questionnaire and make a note of any points you do not understand.

• Collect all the information you will need for the interview. This means financial details, including bank statements, and other paperwork about your finances.

Do not ignore the Official Receiver in the hope that he will go away. He will not. If you do not co-operate, you may have to attend court to be questioned and could even be arrested if you still fail to co-operate. In a bankruptcy, you could also have your discharge from bankruptcy proceedings suspended, which would mean that your bankruptcy could last much longer than the normal three years.

What happens at the first appointment?

You should go to the reception desk when you arrive. You can expect to be seen at the time of the appointment, or certainly no later than five minutes after the fixed appointment time. Then, in a private interview room:

• your questionnaire will be checked by a member of the Official Receiver’s staff – if you have not completed the questionnaire, you will be asked to do so there and then;

• you will be interviewed by an examiner (a member of staff who is a specialist in insolvency matters) who will go into the details of your or the company’s assets and debts, and the facts and circumstances which led to the insolvency; and

• you should hand over all of your or the company’s financial records and papers. They will be examined and recorded then or at a later interview. The records will be kept by the Official Receiver.
You should feel free to ask any questions about the proceedings or your case when you are at the Official Receiver’s office.You may be asked to attend another appointment, particularly if:

• they need more time to complete enquiries into your affairs;

• you cannot, or do not, provide all the financial records;

• they need more details of your assets, debts and financial affairs;

• you cannot provide all the information they need; or

• you do not turn up for any appointment

What happens next?

After the interview, the Official Receiver will check the information you have given. He will issue a report to creditors (and shareholders in a winding-up), setting out your or the company’s assets and debts. If there are material assets, he will seek the appointment of a private sector insolvency practitioner to act as trustee or liquidator to deal with the realisation and distribution of the assets. To do this, the Official Receiver will either call a meeting of creditors to enable them to appoint a practitioner or ask the Secretary of State to make an appointment. Otherwise, the Official Receiver will continue to deal with everything.

• The report to creditors will be issued, usually within 8 (but in any event within 12) weeks of the insolvency order.

• If a meeting of creditors is appropriate, it will usually be held within 12 weeks (but in any event within 4 months) of the insolvency order. You may be asked to attend the meeting of creditors. You will be notified if an insolvency practitioner is appointed as trustee or liquidator.

• You will need to help the trustee or liquidator to deal with your or the company’s affairs by giving your full co-operation.

How long will the process take?

What happens next, and how long it takes, depends on the complexity of the case. If you have provided all the necessary information and no problems are expected in dealing with the assets, you may not hear from the Official Receiver again. Any remaining matters (such as telling the Official Receiver of any change of address) may be dealt with by letter or telephone. In a winding-up, that may be the end of the matter.In a bankruptcy, you will normally remain bankrupt for 3 years or, if your bankruptcy order refers to a “certificate of summary administration”, for 2 years. After this time you will be automatically discharged from the restrictions of bankruptcy. However, if you fail to co-operate with the Official Receiver or trustee, the court can be asked to suspend the discharge period. If the court agrees, your bankruptcy will only end when the suspension has been lifted. If you have previously been bankrupt within the last 15 years, you will not be entitled to an automatic discharge. You will have to apply to the court for your discharge; you cannot do this until 5 years after your latest bankruptcy. Discharge from bankruptcy does not end your trustee’s administration of any assets which became part of your bankruptcy estate. The more difficulty the Official Receiver has in determining the causes of the insolvency or administering the assets, the longer the whole process will take. As part of the process, he may require you to:

• submit a sworn statement of affairs (a summary of your or the company’s assets and debts);

• provide accounts for yourself or the company; and

• provide an account of all dealings in cash and goods.

If you do not co-operate with the Official Receiver, he may also apply to the court for your public examination. This means you will be questioned in open court about your or the company’s affairs, dealings and property. Your or the company’s creditors may also be there and ask questions of you as well. Under the insolvency and other legislation there are provisions about criminal offences and unfit conduct by directors. The Official Receiver will report to The Insolvency Service’s Headquarters if there seems to be evidence of criminality or unfitness. But the Official Receiver does not approach this task on the basis that every bankrupt and director has committed offences or is unfit – his job is to establish the facts. In the vast majority of cases, those facts do not suggest that it is in the public interest for criminal or disqualification proceedings to begin.

Bankruptcy Frequently Asked Questions

Bankruptcy is just one of several options to be considered when an individual cannot repay their 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.

The Bankruptcy proceeding has two aims:

1. To free the individual from the pressures of creditors (people they owe money to) to enable him or her to make a fresh start.

2. To ensure that all assets (such as property and investments) are distributed 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 Courts are officially responsible for making a bankruptcy order against an individual, although this is usually done at the request of either the individual or one of his/her creditors.

The assets of the bankrupt individual then fall under the control of a Trustee, this will be either the Official Receiver (a civil servant and officer of the Court), or a licensed Insolvency Practitioner. Whoever is appointed becomes responsible for uncovering as much as possible about the debtor’s assets and liabilities and then maximising returns for the creditors from the assets available, within certain guidelines.

Once a bankruptcy order has been made against you, your creditors can no longer pursue you for payment. Making payment to your creditors becomes the responsibility of the Trustee.

What is the cost?

There are four fees you may have to pay when you take your petition and statement of affairs to the court:

1. The Court fee of £150

In some circumstances the Court may waive this fee; for example, if you are on Income Support. If you are not sure whether you qualify for a reduction in the fee, or if you are exempt from paying the fee, Court staff will be able to advise you.

2. The deposit of £345 towards the costs of administering your bankruptcy.

This deposit is payable in all cases and helps meet the official receivers costs.

3. The fee to swear the statement of affairs.

In a County Court, no charge is made to swear the affidavit, which is part of your statement of affairs. But in the High Court or before a solicitor there is a £7 charge.

If you are a married couple and you are both applying for bankruptcy, you will each have to pay separate fees. If you were in business as a partnership, each partner will have to pay separate fees, unless all parties apply for a joint bankruptcy petition under the Insolvency Partnerships Order 1994 (Form 16).

The above fees should be paid in cash, postal orders, or by a building society, bank or solicitor’s cheque. Cheques should be made payable to H M Paymaster General. Personal cheques will not be accepted.

4. There is also an addition fee of £450 for the service which Baker Evans supplies.

What are the effects of Bankruptcy?

Property

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.

What are the implications of bankrupcty?

• Lose control of your assets both during the term of bankruptcy

• Your credit rating is affected for many years after the annulment

• You may be able to open a new bank or building society account but will have to disclose the fact that you 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. You 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.

• Your employment could be affected (E.g. If you are a lawyer, charted Accountant, financial Advisor)

• Certain debts such as student loans are not covered by a Bankruptcy Order therefore you will still be responsible for paying these debts.
You 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 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 (E.g. Justice of the peace, member of parliament)

When you are discharged from being bankrupt these constraints are ended.

You can keep:

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.

Where is a bankruptcy order made?

Bankruptcy petitions are usually presented either at the High Court in London or a County Court near to where you live or trade.

A petition can be presented against you even if you are not present in England or Wales at the time, providing you normally live in, or have a recent residential or business connection with, England or Wales.

The address and telephone number of your local County Court is listed under ‘Courts’ in the phone book, where you should look for ‘civil Courts – County Courts’ and not ‘magistrates’ Courts’. The Courts Service website at: www.courtservice.gov.uk has an index of County Courts that will show you the area where the County Court has jurisdiction. However, you will need to contact the Court to find out if it has jurisdiction to hear a bankruptcy case.

What happens in court?

The Court will either hear your petition straight away or arrange a time for the Court to consider it.

If English in not your first language and you need an interpreter, the Court will not be able to help you find one. You will have to do this yourself and pay interpreter’s fees.

At the hearing the Court can do one of four things:

1. Stay (delay) the proceedings – often because the Court needs further information before it can decide whether to make a bankruptcy order.

2. Dismiss the petition – perhaps because an administration order would be more appropriate.

3. Appoint an Insolvency Practitioner – if the Court thinks that an Individual Voluntary Arrangement would be more appropriate. This will only be possible if your assets are more than £4000; your unsecured debts are less than £40,000; and you have not been bankrupt or made an Individual Voluntary Arrangement in the previous five years. If you do not wish to enter into such an arrangement, you should inform the Court.

4. Make a bankruptcy order. You will be bankrupt the moment the order is made by the Court.

Who are the people that deal with your bankruptcy case?

The Official Receiver is a civil servant and an officer of the Court. He is responsible for administering bankruptcies and will act as a Trustee of your estate unless a private sector Insolvency Practitioner is appointed.

One of the Official Receiver’s main duties is to investigate your financial affairs for the time before and during your bankruptcy.

An Insolvency Practitioner can be appointed Trustee instead of the Official Receiver, they must be licensed and are usually accountants or solicitors. The Insolvency Practitioner is then responsible for the disposing of your assets and making payments to your creditors.

What are your duties?

• When a bankruptcy order has been made, you must provide the Official Receiver with information relating to your financial affairs such as, a list of your assets (property, pensions, insurance policies etc), amounts of each debt and to which creditor they are owed to, within 21 days.

• Any assets are then to be handed over to the Official Receiver along with any bank statements and insurance policies relating to your property and financial affairs.

• Any assets and income increases obtained during the bankruptcy should be declared to the Trustee.

• You must not obtain credit of £500 or more from any person without first disclosing the fact that you are bankrupt.

• Any bank or building society accounts must no longer be used.

• You must not make any direct payments to your creditors.

• You may also have to attend Court to explain why you are in debt. If you do not co-operate, you could be arrested.

Bankruptcy Facts

Where Is The Bankruptcy Order Made?

Bankruptcy petitions are usually presented at the High Court in London or a county court near to where you trade or live. A petition can be presented against you even if you are not present in England or Wales at that time. This can happen when:

• You normally live in, or within the previous 3 years have had residential or business connections with, England and Wales

If you want to make yourself bankrupt, you should contact a county court (unless you live or have traded in London, then you should contact the High Court). The address and telephone number of your local county court is listed under “Courts” in the telephone book: references here are to civil courts – the county courts – not magistrates’ courts. Staff at the county court will tell you the name, address and telephone number of the county court where you should present your petition. You will normally have to pay £120 as a court fee but in certain circumstances (for example, if you are on income support), the court may not ask you to pay this fee. However, you will have to pay £250 towards the cost of the administration of your bankruptcy by the Official Receiver.Sometimes government departments start bankruptcy proceedings in the High Court in London or in one of the District Registries. If you did not trade or do not live in the London area, your case will usually be transferred to the appropriate local county court and dealt with by the local Official Receiver, if a bankruptcy order is made.Once the bankruptcy order has been made, it is advertised in “The London Gazette” (an official publication which contains legal notices) and in a local or national newspaper (or both). In addition the Official Receiver will give written notice of the order to a number of organisations.

Who Will Deal With Your Bankruptcy?

The Official Receiver

An Official Receiver is appointed by the Secretary of State and is an officer of the court. The Official Receiver has responsibility for administering your bankruptcy and protecting your assets from the date of the bankruptcy order. He or she will also act as trustee of your bankruptcy estate unless an insolvency practitioner is appointed.The Official Receiver is also responsible for looking into your financial affairs for the period before and during your bankruptcy. He or she may report to the court and has to report to your creditors. There will also be a need to report any matters which indicate that you may have committed criminal offences in connection with your bankruptcy.The Official Receiver will give notice of the bankruptcy order to local authorities, utility suppliers, courts, sheriffs, bailiffs, Premium Bond Office, Land Registry and any relevant professional bodies. Enquiries will also be made of banks, building societies, mortgage, pension and insurance companies, solicitors, landlords and any other persons or organisations who may be able to provide details of any assets or liabilities that you have, or have had, an interest in (either on your own or jointly with others). Third parties will also be asked about any other matters relating to your bankruptcy.

An Insolvency Practitioner

Insolvency practitioners are individuals who specialise in insolvency work. An insolvency practitioner, who must be authorised, can be appointed trustee instead of the Official Receiver. He or she is then responsible for disposing of your assets and making payments to your creditors.

What are your duties as a bankrupt?

When a bankruptcy order has been made, you must:

• comply with the Official Receiver’s request to provide information about your financial affairs. The Official Receiver will be likely to request that you attend at his or her office for an interview – the Court will give you the address of the Official Receiver. (Note, usually before the interview, you will be sent or given a questionnaire which you should fill in as fully and accurately as possible.) If the Official Receiver does not ask that you attend at the office for an interview, you will be sent a letter which will set out what is required of you. Again it is likely that you will be asked to complete a questionnaire. You should note that in either circumstance, any questionnaire completed before the bankruptcy order, supplied to you by an advisor or another third party, will not be acceptable;
• give the Official Receiver a full list of your assets and details of what you owe and to whom (your creditors);
• look after and then hand over your assets to the Official Receiver together with all your books, records, bank statements, insurance policies and other papers relating to your property and financial affairs;
• tell your trustee about assets and increases in income you obtain during your bankruptcy. (Note: by law you must inform your trustee of any property which becomes yours during the bankruptcy. Such property includes lump sum cash payments that you may receive, for example, redundancy payments, property or money left in a will);
• stop using your bank, building society, credit card and similar accounts straightaway
• not obtain credit of £250 or more from any person without first disclosing the fact that you are bankrupt
• not make payments direct to your creditors

You may also have to go to court and explain why you are in debt. If you do not co-operate, you could be arrested.

How will bankruptcy affect you?

a. In relation to your creditors

If you are made bankrupt, you must not make payments direct to creditors. Creditors to whom you owe money when you are made bankrupt make a claim to your trustee (that is, either the Official Receiver or an insolvency practitioner). They should not ask you directly for payment; if you receive any requests, pass them immediately to your trustee to deal with and tell the creditor that you are bankrupt. There are some very limited exceptions to this non-payment rule. The main ones are:

• creditors who have a mortgage or charge on your home (if mortgage payments are not made, the lender may sell your home);
• court fines and other obligations arising under an order made in family proceedings or under a maintenance assessment made under the Child Support Act 1991.
Suppliers of services to your home (gas, electricity, water and telephone) may not demand from you payment of bills in your name which are unpaid at the date of the bankruptcy order. But they may ask you for a deposit towards payment for further supplies or could arrange for the accounts to be transferred into the name of your spouse or partner. You must pay continuing commitments such as rent (if you rent your home), together with any debts you incur after the bankruptcy.

b. Your assets

You will no longer control your assets. If you have a business, this will normally be closed and your employees dismissed.

You can keep the following items unless their individual value is more than the cost of a reasonable replacement:

• tools, books, vehicles and other items of equipment which you need to use personally in your employment, business or vocation;
• clothing, bedding, furniture, household equipment and other basic items you and your family need in the home

All these items must be disclosed to the Official Receiver who will then decide whether you can keep themThe Official Receiver/trustee will take control of all your other assets on the making of the bankruptcy order. He or she, or any insolvency practitioner who is appointed as trustee, will dispose of them and use the money to pay the fees, costs and expenses of the bankruptcy and then your creditors. The trustee may apply to the court for an order restoring property to him or her if you disposed of it in a way which was unfair to your creditors (for example, if before bankruptcy you had transferred property to a relative for less than its worth).The trustee may claim property which you obtain or which passes to you (for example, under a will) while you are bankrupt and may ask the court to order you to pay part of your wages, salary or other income to him or her if your income is more than you and your family need to live on while you are bankrupt. Student loans under the Education (Student Loans) Act 1990, which are made either before or after the start of a student’s bankruptcy, are not regarded as assets which may be claimed by the trustee (where a balance of the loan remains). In addition any money repayable under the terms of the loan is not regarded as a liability. The effect of this is that the administrators of the loans scheme are not regarded as creditors in the bankruptcy, so you are not released from repaying the outstanding portion of the loan when you become discharged from bankruptcy. Loans made under the Education (Student Support) Regulations 1999, following the Teaching and Higher Education Act 1998, are not regarded as assets which may be claimed by a trustee (as before). But money repayable under such a loan is a liability for bankruptcy purposes, so it is released when you become discharged from bankruptcy.

c. Your pension

The effect of the bankruptcy on your pension rights will depend on such things as:

• whether you are a member of an occupational pension scheme or have a personal pension;
• any scheme rules about what happens to the pension in the event of bankruptcy;
and
• the date at which your pension became or would become payable to you
You and your spouse or any dependant who has an interest in your pension may wish to seek independent advice about this. But you must disclose full details of the pension to the Official Receiver/trustee who can consider whether there is an interest which passes to him or her. Note: For further information on pensions in bankruptcy, please click here

d. Your life assurance policy

Generally, your trustee will be able to claim any interest that you have in a life assurance policy. The trustee may be entitled to sell or surrender the policy and collect any proceeds on behalf of your creditors. If the life assurance policy is held in joint names, for instance with your husband or wife, that other person is likely to have an interest in the policy and should contact the trustee immediately to discuss how their interest in the policy should be dealt with. You may want the policy to be kept going. Ask your trustee: it may be possible for your interest to be transferred for an amount equivalent to the present value of that interest. If the life assurance policy has been legally charged to any person, for instance an endowment policy used as security for the mortgage on your home, the rights of the secured creditor will not be affected by the making of the bankruptcy order. But any remaining value in the policy may belong to your trustee.

e. Work-related registrations, licences and permissions

Generally, your trustee will be able to claim any interest that you have in a life assurance policy. The trustee may be entitled to sell or surrender the policy and collect any proceeds on behalf of your creditors. If the life assurance policy is held in joint names, for instance with your husband or wife, that other person is likely to have an interest in the policy and should contact the trustee immediately to discuss how their interest in the policy should be dealt with. You may want the policy to be kept going. Ask your trustee: it may be possible for your interest to be transferred for an amount equivalent to the present value of that interest. Any registration, licence or permission you hold in connection with your work or trade might be affected by the making of the bankruptcy order. You should inform the person who issued the registration or authority of your bankruptcy to establish if it will remain in force or will be cancelled or withdrawn. Any value attaching to these items may belong to the trustee. In considering this issue you should disregard items of a personal nature such as a driving licence.

Payment to creditors

The Official Receiver will tell your creditors you are bankrupt. He or she may either act as the trustee or may arrange a meeting of creditors for them to choose an insolvency practitioner to be the trustee. This happens if you appear to have significant assets. You may have to go to this (or any other) meeting of your creditors. The trustee will tell the creditors how much money will be shared out in the bankruptcy. Creditors then have to make their formal claims. The costs of the bankruptcy proceedings are paid first from the money that is available. The costs include fees that the Official Receiver or the insolvency practitioner charge for administering your case. At least part of the claims from your employees and government departments (such as the Inland Revenue and HM Customs and Excise) may be preferential and are paid next.Finally, other creditors are paid, together with interest on all debts, as far as there are funds available from the sale of your assets. If there is a surplus, it will be returned to you. You would then be able to apply to the court to have your bankruptcy ‘annulled’(cancelled).

What happens to your home in bankruptcy

If you own your home, whether freehold or leasehold, solely or jointly, mortgaged or otherwise, your interest in the home will form part of your estate which will be dealt with by your trustee. The home may have to be sold to go towards paying your debts. If your husband, wife or children are living with you, it may be possible for the sale in the bankruptcy to be put off until after the end of the first year of your bankruptcy. This gives time for other housing arrangements to be made. Your husband, wife, partner, a relative or friend may be able to buy your interest in your home from the trustee. This may be so even if that interest is very small, worth nothing or you owe more on the house than it is currently worth. Such a purchase would prevent a sale of the property by the trustee at a future date. Your spouse or any other interested party should be encouraged to take legal advice about the home as soon as possible.If the trustee cannot, for the time being, sell your home, he or she may obtain a charging order on your interest in it. If a charging order is obtained, your interest in the property will be returned to you, but the legal charge over your interest will remain. The amount covered by the legal charge will be the total sum owed in the bankruptcy (including the costs and money interest). This sum must be paid from your share of the proceeds when you sell the property.Until your interest in the home is sold, or until the trustee obtains a charging order over it, that interest will continue to belong to the trustee, including any increase in its value. Therefore, the benefit of any increase in value will go to the trustee to pay your debts, even if the home is sold some time after you have been discharged from bankruptcy: the increase in the benefit will not be yours.If you rent your home, the trustee will normally have no interest in it and therefore cannot sell it. However, if you do not comply with the terms of the tenancy agreement, the landlord may take action against you. In most cases the Official Receiver or your trustee will need to tell your landlord that you are bankrupt

What are the restrictions on a bankrupt?

The following are criminal offences for an undischarged bankrupt:

• obtaining credit of £250 or more either alone or with another person, without disclosing your bankruptcy. (Note: this is not just borrowing money – it includes your getting credit as a result of a statement or conduct which is designed to get credit, even though you have not made a specific agreement for it. For example, ordering goods without asking for credit and then failing to pay for them when they are delivered);
• carrying on 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.
You may not hold certain public offices. You may not hold office as a trustee of a charity or a pension fund.After the bankruptcy order, you may open a new bank or building society account but you should tell them you are bankrupt; they may impose conditions and limitations. You should ensure you do not obtain overdraft facilities without informing the bank that you are bankrupt or write cheques which are likely to be dishonoured. Tell your trustee about any money you have in the account which is more than you need for your reasonable living expenses. Your trustee can claim the surplus amounts to pay your creditors.

Note: If you wish to resume trading, you should be aware of the need to register again for VAT if you meet the registration requirments. You should not continue to use your pre-bankruptcy VAT registration number.

Becoming free from bankruptcy

a. How long does bankruptcy last?

Generally you will be automatically freed from bankruptcy (known as “discharged”) after 3 years. If your bankruptcy order refers to a “certificate of summary administration”, you will be discharged after 2 years – for details of summary administration, see section 18. You will also become free from bankruptcy immediately if the court annuls (cancels) the bankruptcy order; this would normally happen when your debts and the fees and expenses of the bankruptcy proceedings have been paid in full or the bankruptcy order should not have been made. On the other hand, if you have not carried out your duties under the bankruptcy proceedings, the Official Receiver may apply to the court for your discharge to be postponed. If the court agrees, your bankruptcy will only end when the suspension has been lifted and the time remaining on your bankruptcy period has run.You will not get an automatic discharge from bankruptcy if you have been an undischarged bankrupt at any time during the 15 years before the current bankruptcy (unless the previous bankruptcy has been annulled). If this applies to you, and you wish to obtain your discharge, you must ask the court. You may do this at any time after 5 years from the date of your current bankruptcy order. Even then the court may refuse or delay your discharge, or grant it conditionally on terms requiring you to make some payments out of your income.

b. Debts

Discharge releases you from most of the debts you owed at the date of the bankruptcy order. Exceptions include fines, debts arising from fraud and any claims which cannot be made in the bankruptcy itself, including Student Loans (see section 7). You will only be released from a liability to pay damages for personal injuries to any person if the court thinks fit.When you are discharged you can borrow money or carry on business without the restrictions previously referred to. You can act as a limited company director unless you are disqualified from doing so as a result of a separate order arising out of your involvement with a company.

c. Assets you owned or obtained before your discharge

When you are discharged there may still be assets that you owned, either when your bankruptcy began, or which you obtained before your discharge, which the trustee has not yet dealt with. Examples of these may be the interest in your home, a pension or assurance policy or an interest in a will or trust fund. These assets are still controlled by the trustee who can deal with them at any time in the future. This may not be for a number of years after your discharge. These assets do not return to youWith some assets – such as your home and some types of assurance policy – your spouse, a partner, a relative or friend may want to buy your interest. He or she should get in touch with the trustee straightaway to find out how much they would have to pay.You must tell the Official Receiver about assets you obtain after the trustee has finished dealing with your case but before you are discharged. These assets could be claimed to pay your creditors. You have a duty to continue to assist your trustee after you have been discharged

d. Assets you obtain after your discharge

Usually you may keep all assets you acquire after your discharge

Debts incurred after you have been made bankrupt

Bankruptcy deals with your debts at the date of the bankruptcy order. After that date you should manage your finances more carefully. If you incur new debts this could result in:

• a further bankruptcy order even before you are discharged from the first bankruptcy;
• prosecution if, when you incurred the debts, you did not disclose that you were bankrupt.

You will not be entitled to an automatic discharge from a second bankruptcy if you have been an undischarged bankrupt at any time in the 15 years before the current bankruptcy.

How To Go Bankrupt

Bankruptcy may be considered when an individual can no longer afford to pay their debts.

Anyone can go bankrupt, whether it be an individual, members of a partnership or a company.

Bankruptcy is a legal status that usually lasts for twelve months, after which, the majority of your debts will be cleared.

There may be other options available such as an IVA (Individual Voluntary Arrangement), DMP (Debt Management Plan) or a DRO (Debt Relief Order)

How does Bankruptcy work?

It is important to act as soon as possible when you have a problem with your debts to find out about all the options available to you.

Once Bankruptcy has been agreed, the courts will make a Bankruptcy order against you. Payment of your debts will be taken over by an official receiver who will repay them by selling some of your assets.

A court will make a bankruptcy order only after the bankruptcy petition has been presented. This will either be presented by yourself (debtor’s petition); or by one of the creditors who are owed at least £750 by you and it is unsecured (creditor’s petition).

A bankruptcy order can be made even if you refuse to acknowledge or refuse the proceedings. You should co-operate fully once the proceedings have begun. You should try and reach a settlement before the bankruptcy petition is due to be heard if you dispute the claim.

When will my Bankruptcy end?

You will go through a process called “discharge of Bankruptcy” which removes the restrictions of bankruptcy and releases you from the majority of the debts you owed when the bankruptcy order was made.

You will usually receive your discharge automatically, even if no payments have been made to your creditors, you will be making contributions through an income payments order.

The official receiver can apply to court for a bankruptcy restrictions order, which means you continue to be the subject of restrictions after discharge for the length of time stated in that order. This will not affect the discharge of your debts.

Will I lose my home?

To help pay your bankruptcy debts the official receiver or the trustee may have to sell your home. Your lender may be able to sell your home if your home is mortgaged and you fall behind with your payments. You should contact your lender about your mortgage payments and your bankruptcy.

What are the restrictions of Bankruptcy?

The following are criminal offences for an undischarged bankrupt:

- obtaining credit of £500 or more
- carrying on 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 involved (directly or indirectly) in promoting, forming or managing a limited company, or acting as a company director, without the permission, whether formally appointed as a director or not.

Certain public offices may not be held. You are restricted in holding office as a trustee of a charity or a pension fund. Once the bankruptcy order has been completed, you can open a bank or building society account but they must be informed of the bankruptcy this may lead to conditions and limitations being placed. Overdraft facilities are forbidden without informing the bank that you are bankrupt.

The Cost Of Going bankrupt

• The court fee of £150. In some circumstances the court may waive this fee; for example, if you are on Income Support. If you are not sure whether you qualify for a reduction in the fee or whether you are exempt from paying the fee, court staff will be able to advise you.

• The deposit of £360 towards the costs of administering your bankruptcy. This deposit is payable in all cases.

• The fee to swear the statement of affairs. In a county court, no charge is made to swear this affidavit, which is part of the statement of affairs. But in the High Court or before a solicitor there is a £7-10 charge.

If you are a married couple and you are both applying for bankruptcy, you will each have to pay separate fees. If you were in business as a partnership, each partner will have to pay separate fees, unless all the partners apply for a joint bankruptcy petition under the Insolvent Partnerships Order 1994 (Form 16). Form 16 is available from the court or a copy can be printed from The Insolvency Service website at: www.insolvency.gov.uk

The above fees should be paid in cash or postal orders, or by a cheque from a building society, bank or solicitor. Cheques should be made payable to H M Paymaster General. Personal cheques will not be accepted.

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?

Disadvantages Of Going Bankrupt

Bankruptcy Disadvantages:

• All available assets will be sold to your creditors in order to meet your unsecured debt commitments, including your home and possibly your car. Only those which are required for a basic standard of living will remain.

• If you live in rented accommodation and are behind on your payments, your bankrupt status may mean that your landlord can commence a possession action of their property.

• Any spare income will be paid to your creditors.

• It may hinder your future career prospects. For example, bankrupts cannot become company directors. Whilst this may not apply to you, you need to seek expert advice and refer to your contract of employment.

• There are a number of professions including the Post Office that will not employ bankrupts for some jobs; i.e. you cannot be a postman handling mail that may contain cheques. Additionally you cannot be in the armed forces or the police force. Certain other professions such as the legal and accountancy professions also impose restrictions on bankrupts.

• Your credit rating will take years to rebuild, as the bankruptcy order will remain on your credit file for six years. Thus you may not be eligible to open a new bank or building society once you have faced Bankruptcy.

• If you wish to gain credit in excess of £500 then you must declare that you have been made bankrupt.

• Bankruptcy details will be advertised in your local paper and can be viewed online at the Insolvency Service website.

• Certain debts cannot be written off, such as fines, maintenance or child support, personal injury debt and fraud.

Avoid the Disadvantages of Bankruptcy:

As you can see, there are many disadvantages of bankruptcy that cannot be avoided. There are alternative debt solutions you might like to consider before Bankruptcy. Please see:

• IVA – Government introduced IVA legislation as an alternative to Bankruptcy. Your Bankruptcy debt can be written off and you keep control of your assets. Losing control of your finances and possibly your home are some of the worst disadvantages of Bankruptcy.

• Trust Deeds – Often referred to as an IVA for Scotland. A Trust Deed can write off unaffordable debt, but the terms vary from an IVA.

• Debt Management – An informal debt repayment scheme where we can arrange a lower monthly payment to your creditors. Your debt cannot be written off but creditors are sometimes willing to freeze additional interest or charges.

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?

Effects Of Bankruptcy

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?