Bankruptcy is a legal process for those who can no longer afford to pay back their debts, if you owe more than £750. A Bankruptcy Trustee is assigned to sell your assets and distribute the funds accordingly. Once this process has begun, creditors can not process any further claims against you. For more information please see our What is Bankruptcy page.
Anyone can declare themselves Bankrupt as long as they are a resident of the UK and the debts were occurred in the UK.
You will have to present your Bankruptcy application documents at your local County Court. You will also need to pay a court fee and appear at Court in person. For more detailed information about how to declare yourself bankrupt, please see the Declaring Bankruptcy page.
As soon as the bankruptcy is declared, all your assets will become the possession of your Trustee in Bankruptcy. They have the authority to sell them in order to pay some of your debts, and this can be done without your consent. You may lose high value assets such as jewellery, shares and any interest you have in your property.
If the Trustee or Official Receiver determines that you have surplus monthly income, they will apply to court for an Income Payments Order which will force you to pay a monthly sum for 3 years. The only items that you will be able to keep are basic household amenities and any tools associated with your employment. You may keep your car if it can be shown to be essential for work or domestic purposes, but if it is of high value then you may be required to trade it in for something cheaper and hand over any surplus.
Once you have been declared bankrupt, your credit reference agencies will be notified. The bankruptcy order will remain on your file for six years. Even after this time you may still have to declare your bankruptcy status when applying for credit, such as a mortgage.
There are many negative consequences which are connected to Bankruptcy which are sometimes flippantly disregarded, as it can be seen as the 'easy' option to write off all your debts. It still has a social stigma attached to it, as your details would be advertised in your local newspaper and are available online. It will be difficult to apply for future credit or bank accounts, and certain career prospects will be closed to you.
Bankruptcy can be defined as:
The legally declared inability or impairment of ability of an individual or organisations to pay their creditors. An insolvent person can be legally relieved of of their financial obligations.
There are often a number of alternatives which should be considered. Examples of these include an IVA, which will be able to write off a large proportion of your debt and you pay a set amount back, typically over 60 months. A Debt Management Plan may also be a viable option.
For more details please contact our free phone number: 0800 019 5870. Alternatively fill in the online Quick Enquiry form and we will call you back.
There are many implications in Bankruptcy which cannot be avoided, which include a Trustee being in charge of your assets and to gain credit of more than £500 you must declare your bankrupt status. For more information please see the One Advice After Effects of Bankruptcy page.
Whether or not your home is solely or jointly owned, it may have to be sold to help pay off your debts.
This may be dependant on your tenancy agreement, as if you fail to make payments to your rent then the landlord can take action against you. If you keep up on your repayments then the Official Receiver will not have much interest as they cannot sell your rented home to make repayments to your creditors, but it is always best to seek professional advice so that you are aware of your legal rights.
It depends on the sector that you are in. If you are a member of a professional body then you may have to resign, but check your contract Terms of Employment which should provide you with more information.
It is possible that the Court fees can be reduced if you are in receipt of certain benefits. For more information about this, please contact your local County Curt.
Although bankruptcy does clear most of your earlier debts, there are still those which are not written off. These include Court fines, Child support, Debts connected with fraud, Student Loan Company debts and Secured creditors.
The right debt solution for you is dependant on a number of factors. There are many reasons why people opt for an IVA over Bankruptcy, and visa-versa.
One Advice would always recommend that you seek expert debt advise before you declare yourself bankrupt. For free bankruptcy advice, contact our professional bankruptcy advisors on 0800 019 5870.
Bankruptcy ensures that your creditors will all get paid fairly, but there is a certain order in which this happens:
Yes, there are alternatives to Bankruptcy and One Advice would recommend that you seek other debt solutions before declaring yourself bankrupt.
Take the 1 Minute Debt Test to see which debt solution is right for you.
Although you will be struggling with financial problems, if you petition for your own bankruptcy, then yes it will cost you to go bankrupt. The Court fee is currently: £345 towards the administration of your bankruptcy order, £150 court fee and £7 for swearing of the statement of affairs in High Court or before a solicitor.
Bankruptcy offers you a fresh financial start, so it is important that you take stricter control over your finances. Bankruptcy will only deal with your debts before the date of the bankruptcy order. New debts after this date will not be included, and could result in further bankruptcy order and prosecution..
No, all of your bank accounts will be closed and any money will be used to pay your creditors. You will only be allowed to open a new bank account with permission from your Trustee. If you have a joint bank account then only half the funds will be taken.
Yes, bankruptcy orders are advertised in your local newspaper and your details are placed within the public domain on the bankruptcy register, which is maintained by the Department of Trade and Industry and the Insolvency Service.
This is in addition to anyone which you have a financial relationship with, such as a landlord or mortgage company.
Yes, there is a process where a person can be discharged from Bankruptcy which means that they are released from any of the restrictions imposed on them by their Bankruptcy Order.
You can only include your Student Loan Company debt if it was taken out before 1st September 2004. If it was after this point then you will still have to continue making payments from your salary until it has been paid off in full.
We would strongly advise that you are honest with all your financial dealings to your partner. If you do not have any joint debts then it will not make any difference, however a mortgage is considered to be one. If you live together, then the bankruptcy order will be held against your residential address which may affect them. If you have equity to your home this will be dealt with in the bankruptcy and this will obviously involve your partner.
As long as there is no joint debt then your partner will not be directly affected by your Bankruptcy Order, such as having to make contributions from their own wage/income.
However, if you have joint debts, such as a mortgage then you are both liable for these debts. So creditors will often want the partner to pay in full any debt that is included in the bankruptcy order.
Once your order has come to County Court, you will be given a date which you must attend. The hearing will involve a number of detailed analyses over your financial status, and it will end with a decision on whether or not bankruptcy will be granted, or it will perhaps offer other alternatives.
It is dependant on the situation on which you have been made bankrupt, but the average period is 12 months. The Official Receiver could shorten this period if they have completed their enquiries earlier and file a notice to that effect in court.
Other ways that the bankruptcy duration can be reduced are if the court annuls the order as the debt has been paid or that it should not have been declared in the first place. Even though you Order may end early you should still remember that there are some effects of bankruptcy which cannot be cleared.
You should take this matter very seriously if you find yourself in the position to declare yourself bankrupt again. The minimum bankruptcy discharge period is 5 years, and may continue for 15 or more.
Unfortunately, your Trustee will have the ability to take your home, unless your partner can purchase your share of the equity. Any available equity will be passed over to the creditors.
Any pension payments during your bankruptcy order will be considered as an income, so it will be paid to your Trustee.