|
When Would you Decide to Declare Bankruptcy?
By and large, most people who declare bankruptcy have no alternative. They would usually have tried informal solutions such as Informal Repayments and Debt Consolidation, and found that their problems remain unsolved. They might also have considered the possibility of an IVA, and found that they could not afford the repayments that it requires. Once all these options are exhausted, the only thing left to do is go bankrupt.
Sometimes people who are eligible for other solutions such as IVAs nevertheless decide to declare bankruptcy. Pensioners, for example, and those living on State Benefits, will usually be financially better off if they declare bankruptcy. They will probably be discharged in less than one year, and it is likely that they will not be subject to an Income Payment Order. Therefore for these people, bankruptcy might be more attractive than an IVA. Other people who opt for bankruptcy rather than an IVA usually do so because they have no significant assets to lose. In addition, if their job is not affected by bankruptcy, they are not worried about having a poor credit rating and are not concerned about having their name in the papers, (i.e. the main disadvantages of going bankrupt do not apply).
Anyone can go bankrupt. The process itself is not as difficult as it may first sound. If you are living in the UK you can declare yourself bankrupt under UK law if you meet the following criteria: A. You are domicile in the UK. I.e. You have a UK passport and a UK correspondence address (this could be a family member). B. The majority of your debt was taken while living in the UK. C. You are able to afford to paid the associated Court Fees which are c£475 (payable in cash to the Court Clerk on the day you present your Petition). Note, if you are receiving certain benefits, you may be eligible for a reduction in these fees. Steps to be undertaken to declare yourself bankrupt
1. Identify Your local County Court and Tel Number
To declare bankruptcy, you will have to present your bankruptcy application documents (petition documents) in person at the County Court local to where you live. If you live in London, you may have to present your documents at the Royal Courts of Justice located in the Strand.
2. Contact Your Local County Court and Request Application Forms
Telephone your local County Court and confirm that you are considering bankruptcy. Check whether you are speaking to the correct Court location based on your home address. This is important as you must present your Petition for Bankruptcy at the County Court local to your place of residence. You should then ask the Court to post you the necessary application forms for Bankruptcy and associated information. You will need two documents: Bankruptcy Petition (doc 6.27)
Statement of Affairs (doc 6.28)
The Court will post blank copies of these documents to you free of charge. Alternatively, these forms can also be downloaded from the internet using the following website links:
3. Confirm the Court Fee
If you want to declare bankruptcy, you will have to pay a Court fee. This is generally c£475/person. When you are speaking to the Court, you should confirm the exact charge. If you are currently receiving benefits, then you may be able to apply for a discount. You should ask the Court about this.
4. Confirm Whether You Need to Book an Appointment
When you speak to the Court, it is important to ask whether you will need to make an appointment or whether they can just turn up at any time. Different Country Courts have different procedures. If you need to book an appointment you may have to do so quite far in advance.
If you live in London and are planning to attend the High Court in the Strand, you will normally not need a prior appointment. You can just turn up on the day. 5. Complete your Bankruptcy Petition and Statement of Affairs Documents
The bankruptcy Statement of Affairs forms are c30 pages in length. They need to be completed fully and correctly. This will normally take between 1-2 hours. Once completed, you should make a photocopy of the forms for future reference. Normally there will not be any facilities at the Court for you to do this. 6. Present Your Completed Application Form at Court
Once you have completed your forms, you must take them, together with your Bankruptcy fee, in person to your local County Court. You should ensure that you arrive no later than 9.30 to ensure the process can be completed the same day. Once at court the following will happen: A Clerk of the Court will take your fee, ensure that your application forms are correctly completed and witness your signature on the Petition Document.
You will then meet privately with a District Judge. The Judge will ensure that you eligible for Bankruptcy (i.e. insolvent) and will determine whether bankruptcy is appropriate. If the Judge agrees with the Petition, they will declare you bankrupt the same day.
You will be asked to visit the Official Receiver. This will either be arranged for the same day or you will have to make an appointment at a future date.
Meeting the official receiver
Once you have been declared Bankrupt by the District Judge, you will then have to meet with the Official Receiver (OR). The Official Receiver will study your application forms in more detail. Based on this information, they are responsible for deciding decide how your Bankruptcy will be dealt with: The Official Receiver will decide the following things: How long the bankruptcy will last. This will normally be 12 months although the Official Reciever has discretion to shorten or lengthen this.
If you can afford to make a monthly payment towards your debt and if so how much (known as an Income Payment Order which will normally last 36 months).
If you have any assets or property, how these will be treated. I.e. if and when they will be sold to realise the asset value for the creditors. Who Can declare themselves bankrupt? You can only declare yourself bankrupt if you are truly insolvent. I.e. if you do not have enough money each month to cover both your reasonable living expenses and your debt repayments and / or the total amount of your assets is less than the total amount of your debt. Homeowners: If the equity you own in your property is greater than the amount of debt, then you are not insolvent and should generally avoid bankruptcy. Will Your Job Be Effected If you Declare Bankruptcy?
There are various professions which will not allow you to continue to practice while you are a bankrupt person. These include: Lawyers, Chartered Accountants, or many positions within the Financial Services industry. You will also be prevented from being a Member of Parliament, Justice Of The Peace or Local Authority member while you are a bankrupt person.
If you are a member of the Police Force or Armed Forces, declaring bankruptcy may have an adverse effect on your career. Before declaring bankruptcy, you MUST discuss your circumstances with your personnel department or a superior. As a bankrupt person, you can not operate as a Limited Company Director or be involved in the promotion, formation or management of a limited company without permission from the court. If you are currently in such a position, you must think very carefully before declaring yourself bankrupt. Where do you Live?
Bankruptcy is only available for people who are resident in England and Wales. If you live in Scotland or the Channel Islands, then different rules and law apply. You should seek separate advice from the local CAB.
When Would you Decide to Declare Bankruptcy?
By and large, most people who declare bankruptcy have no alternative. They would usually have tried informal solutions such as Informal Repayments and Debt Consolidation, and found that their problems remain unsolved. They might also have considered the possibility of an IVA, and found that they could not afford the repayments that it requires. Once all these options are exhausted, the only thing left to do is go bankrupt.
Sometimes people who are eligible for other solutions such as IVAs nevertheless decide to declare bankruptcy. Pensioners, for example, and those living on State Benefits, will usually be financially better off if they declare bankruptcy. They will probably be discharged in less than one year, and it is likely that they will not be subject to an Income Payment Order. Therefore for these people, bankruptcy might be more attractive than an IVA. Other people who opt for bankruptcy rather than an IVA usually do so because they have no significant assets to lose. In addition, if their job is not affected by bankruptcy, they are not worried about having a poor credit rating and are not concerned about having their name in the papers, (i.e. the main disadvantages of going bankrupt do not apply). Will my Spouse / Partner be affected by my Bankruptcy?
If your financial affairs are separate, the answer is no. Assets which are truly in your Spouse or Partner’s name can not be taken into account if you declare bankruptcy.
If you declare bankruptcy, a third party who lives at the same address as you may experience problems with their credit file. Unfortunately it is common for information to creep from one person’s credit file to another’s, especially if they share the same address. In order to prevent this from happening, the third party must contact the one of the credit reference agencies (Experian or Equifax) ask them to ‘create a disassociation’. This means that your information will be removed from their file, and their information removed from yours. To do this, you must give Experian or Equifax your full names and dates of birth, as well as details of your relationship and any shared addresses. Can I go bankrupt more than once? Yes. However, if you declare bankruptcy a second time, the period of your Bankruptcy Order is likely to last more than 12 months and your Income Payment Order may be extended too. Advantages and disadvantages of bankruptcy Bankruptcy: the advantages If you go bankrupt, all of your debts will be taken away from you and you will no longer be responsible for repaying them.
After twelve months you will be ‘discharged’ from bankruptcy, and the bankruptcy restrictions will be lifted. Any money outstanding will be written off, except for Student Loans and non-dischargeable debts.
Even though your house and car may be at risk, your reasonable household goods are safe – nobody will be knocking on your door to seize your DVD player, sofa, fridge or washing machine.
Your payment plan to the court usually lasts only for three years – that’s two years less than an IVA.
Bankruptcy: the disadvantages Bankruptcy is a public affair; your name will be published both in your local newspaper and the London Gazette. You will be required to pay any extra money that you have to the court, usually for three years.
Your credit rating is significantly damaged; the record of your bankruptcy will remain on your credit file for six years.
Debts to the Student Loans Company cannot be included, and will remain after you have been discharged.
You will normally have to give up control of your house and assets ( other than reasonable household items and cars worth less than £1500), unless reasonably required in the course of your business. If you declare bankruptcy the Court will ask you about your assets. If you have assets which could and should be sold for the benefit of your creditors, then you will have to do this. Normally you will not be asked to sell normal household goods. However, if you have any expensive luxury items, these may be at risk. What if the goods are not yours?
Of course, you can only be asked to sell items which belong to you. If you have an expensive luxury items in your house but you can prove that they are owned by someone else (perhaps a relative), then these can not be touched by the Court. If you own expensive luxury items jointly with someone else, the Court may be able to sell these. The third party’s half of the sale price would be returned to them. Your half would be kept by the court. Household Goods and Items
If you are thinking about bankruptcy, don’t worry about men arriving outside your house with a white van and taking all of your worldly goods, leaving you sitting on an orange box. This does not happen. The Official Receiver will normally allow you to keep reasonable personal and household items. These items normally include furniture, electrical goods (your TV, DVD player and Stereo) and items in your kitchen such as your washing machine and fridge freezer. As a rule of thumb, the law states that if you sell an expensive item and receive enough money to buy a cheaper version with a substantial amount left over, that item would be classed as ‘unreasonable’ and it would have to be disposed of and the proceeds contributed towards your bankruptcy. Such items might include a plasma television or a state-of-the-art sound system. If you don’t possess any such luxurious items, you will be safe from the bailiffs. If however, your furniture is made up of expensive antiques, then after the sale of these items, you would be able to refurnish your house with cheaper items and there would be money left over to go towards paying your debt. In this case then, the Court may be able to sell these items. Vehicles
If you have a car which you need for your business or to get to and from work, you will normally be allowed to keep this as long as its value is not unreasonable. Often, if the value of your vehicle is greater than £1,500-£2,000 the court will consider that should be sold. You would be allowed to by a cheaper vehicle and the difference would go towards your debt. You might be able to avoid the sale of the vehicle if a relative or friend can give cash to the Court for the amount it is worth over £1500. If you need a special vehicle for work and the value of this is greater than £1500, the Court may agree to letting you retain the vehicle as it is a reasonable tool of your trade without which you could not work.
If you have a second vehicle such as a motorbike which you keep just for recreation, then it is likely that the Court will demand that this is sold and the money given to your creditors. Rented House
If you are living in a rented property, this will not be effected by your bankruptcy. It is likely that your landlord will be told that you have been declared bankrupt. However, as long as you maintain the agreed rent, most landlords will be happy for you to remain in the property. Freehold / Leasehold Land or House
As a bankrupt, ownership of any equity that you have personally in any house or other property will pass to the Court. The Court will want to realise this equity for the benefit of your creditors. This means that either a third party will have to make an offer to the Court to buy out your equity or the Court will force the sale of the property to release the equity. If your husband, wife or children are living with you, it may be possible to put off a sale until the end of the first year of your bankruptcy to give time for other housing arrangements to be made. What happens if the property is owned jointly with someone else?
If you have a joint mortgage, the asset would be seized regardless of your partner’s financial situation. Unfortunately, there is no way to avoid this forced sale. However, the court will only be able to claim your share of the equity; the rest of the equity will be returned to its rightful owner. Your partner would, however, be able to make an offer to buy your share of the equity and this money would be offered to the Official Receiver instead. What will happen if I have no equity in my property?
The creditors are not interested in the physical bricks and mortar of your house – what they want is the equity that is tied up in it. If your house contains no equity at all, the Official Receiver will still take possession of the house. However, once this has happened, it is possible for a third party (relative or friend) to approach the Official Receiver and offer to buy back the title to the property for a nominal sum of £1 (plus the cost of solicitor’s fees). If you fail to do this, the Official Receiver will remain in control of the property for 3 years. If the property has acquired more value during that time, you would stand to lose that money. However, if the Official Receiver does not sell the property within 3 years, the Enterprise Act states that the property would be returned to you.
Pension
In most cases, your pension fund would remain untouched by the court. However, you may be required to suspend payments into the fund for the duration of your bankruptcy. Windfalls While You Are Bankrupt
If you receive a windfall during the 12 months of your bankruptcy, this money would be seized by the court for the purposes of paying your creditors. However, once you have been discharged you are allowed to keep any lump sums you receive, even though your Income Payment Order may still run for a further two years. Will I have To Make Any Monthly Payments To The Court?
As a bankrupt person, you will be expected to make your best effort to repay what you can to your creditors through the Court. The Official Receiver will assess your ability to make monthly payments by considering your income and reasonable monthly living expenditures.
You will definitely be allowed to keep enough to cover your reasonable costs of living. However, if you can afford to make monthly payments, the Official Receiver will introduce an Income Payment Order. Often, the Court will request that payments are deducted directly from your wages. This order will last for 3 years (ie for up to 24 months after you have been discharged from your bankruptcy) and will be regularly reviewed. As such, during the three year period, if your circumstances change and you can afford to pay more, you will have to do so.
It is unlikely for an income payment order to run for longer than 3 years unless the Official Receiver feels there is a substantial reason to prolong it such as evidence of fraud or a previous bankruptcy. Can I save my assets by signing them over into somebody else’s name?
Absolutely not. The court will check as to whether you have given away any major assets – or sold them for less than their true value – over the last five years. If you have done so, the asset will be seized by the court regardless of who is in control of it at that time.
Can I have a bank account if I go bankrupt? If you go bankrupt, you can still hold a bank account. It is unlikely that this will be a regular Current Account. Instead you would have a basic Cash Card Account. This means that you would have no chequebook, overdraft, Debit card or other lending facilities. However, you will be in full control of the account. Your wages can be paid into it and you will be able to set up direct debits and standing orders. Pre-Paid Debit Cards Clearly using only a Card Cash account with no Debit Card is a hassle, as it means that you have to pay for all your transactions with cash. However, recently a new type of Debt Card called a ‘Pre-payment Debit Card’ has been introduced in the UK. This means that you are able to ‘charge up’ a Debit Card with money, and then use the money on that card for transactions and purchases. There are now a number of Pre-Paid card providers. You can get a prepay MasterCard from It costs around 16 pounds initially and 5 pounds per month to use. You can have wages, benefits etc paid directly onto it and its accepted almost everywhere. All you need is a passport or driving licence to obtain this one. Top ups are made at the post office and are free.
During the bankruptcy period itself, you will find it extremely difficult to get a mortgage or any form of unsecured credit. After this time it will become increasingly possible to borrow again. However, Bankruptcy will damage your credit file. Even if you are discharges after 12 months, the record of your bankruptcy remains on your credit file for six years, meaning that for this period it is very difficult for you to obtain further unsecured credit without being subject to higher interest charges. Although there are an ever increasing number of adverse mortgage brokers who work with individuals who have been discharged from bankruptcy, you will be unable to take secured credit at normal rates. How To Get a Copy of your Credit File To find out how your bankruptcy has been recorded, you can request a copy of your credit file There are two companies that supply 99% of all credit reference requests. If you feel that the information on file is wrong or unfair you can write to the credit agency and ask them to rectify the entry. The agency must reply within 28 days. If you feel that you are still not getting a fair hearing you can write to: The Director General of Fair Trading
The Office of Fair Trading
Field House
Breams Building
LONDON EC4A 1PR Add in your letter that you are "sending the letter under Section 159 (5) of the Consumer Credit Act 1974" and include: a) Your full name and address
b) Name and address of credit reference agency
c) Your reference number given by the credit reference agency d) The nature of your complaint: what you see as being wrong, and how it affects your credit status and applications COUNTY COURT FEES
DO I HAVE TO PAY A FEE FOR AN APPLICATION IN THE COUNTY COURT?
There will usually be a fee to pay with your application. You can ask the court not to pay the fee in some circumstances. The form you will need to fill in is called an EX160 'Application for a fee exemption or remission'. This form needs to go to the court with your main application. If the court agrees your application you will not have to pay the fee. If you pay a fee when you should have been exempt or would have qualified for a remission then you have six months to apply to the court for a refund.
EXEMPTIONS
If you are on Income Support or income-based Jobseeker's Allowance (JSA) you can ask the court for exemption from the fee. You need to give the court proof that you are getting the benefit. You will be exempt if you or your partner are on the guarantee credit element of Pension Credit.
If you are on Working Tax Credit you will be exempt from the court fee in these circumstances: if you are also on Child Tax Credit; or you receive the disability or severe disability element in your Working Tax Credit; and in either case your gross annual income taken into account for Working Tax Credit is £15,460 or less (from 6 April 2006). You will need to show the court your Tax Credit award notice to qualify. If you do not qualify under these rules for an exemption then you can ask for the fee to be remitted or waived by the court. See below. REMISSIONS
Ask the court for the fee to be remitted (or waived) if it will cause you what the court calls 'undue financial hardship'. You can use the same EX160 application form. You may be on a low income or a benefit that does not automatically exempt you from paying the fee. Give as much information about your circumstances as you can. Explain your financial situation on the application form and any exceptional circumstances that apply in your case. The court can remit all or part of the fee depending on what they decide you can afford.
How to go Bankrupt
Filling in your own bankruptcy petition
If you wish to make yourself bankrupt you can obtain a form from your local county court offices. From 1 April 2007 it costs £335 deposit plus £150 as a court fee, payable in cash when you submit your form to the court.
You can now fill in your bankruptcy petition and the statement of affairs online. You can complete the forms in stages and save the information for later. You then save your details online and print the forms off to hand in to the court in the usual way. The online forms service is provided by the Insolvency Service. INFORMATION
If you are on a low income or certain benefits you may not have to pay the court fee.
See the section on fees at the end of this fact sheet.
Only the larger county courts deal with bankruptcy petitions so you may not be able to take your petition to your local court. If you live in central London you may have to take it to the High Court but the procedure is the same. There will then be a hearing in front of the district judge, which is often on the same day. The judge decides whether it is appropriate to make the order. If the order is made you will then have an appointment to see the official receiver who deals with your bankruptcy, sometimes this will take place over the telephone. They will want to go through a long questionnaire with you to look at all your personal and financial details, such as your National Insurance number and pension policy details, income, outgoings and assets. A creditor making you bankrupt
A creditor can make you bankrupt if you owe £750 or more to that creditor and you have not been able to agree how to repay the debt. Creditors can club together to make you bankrupt but this is rarely done. You can also be made bankrupt if your individual voluntary arrangement (IVA) fails. Before presenting a bankruptcy petition a creditor must send you a 'statutory demand'. A statutory demand is a pre-court form that requires you to either: pay the demanded amount;
offer to secure the debt against any property you own (create a voluntary charge);
offer to pay the debt in a way that is satisfactory to the creditors e.g. by instalments.
Statutory demands can be hand delivered or posted. Some creditors use them as a bluff to try to get you to pay the debt quickly, for example by borrowing elsewhere, but the creditor may not actually apply to make you bankrupt. This is because it does not cost very much for a creditor to send you a statutory demand but the creditor would have to pay large up-front fees to make you bankrupt. Twenty-one days after a statutory demand is served, the creditor can apply for a bankruptcy order through the county court. However, you can apply to have the statutory demand 'set aside' in certain circumstances - for example if your debt is below £750 or there is a dispute about the money owed. ADVICE
If you have been sent a statutory demand you should check if you can set this aside. Phone us for advice. Do I have Assets?
Once you are bankrupt the official receiver, or appointed trustee, may wish to sell any assets you have.
INFORMATION
Certain goods are not treated as assets. These are things such as clothing, bedding, furniture and household equipment for basic domestic needs.
Items necessary for you to carry on your employment such as tools, books or vehicles can also be excluded. If you have valuable household items such as antiques or expensive electrical equipment then these could be sold in order to raise money. You car might be sold if it is valuable but it can be exempt if it is necessary for your employment. You may have to buy a cheaper car instead. If the official receiver decides you have assets then they will usually be sold as soon as possible. If you are discharged from bankruptcy before any assets are dealt with they will not belong to you on discharge. Your assets will continue to belong to or 'vest' in the official receiver until they are dealt with.
Bankruptcy and Hire Purchase Agreements
There may be a clause in the hire purchase agreement that allows the hire purchase company to terminate the agreement if you become bankrupt. In this event, you will have to return the item.
If you wish to keep the item, it is possible for the hire purchase company not to cancel the agreement and for the trustee to allow you to continue to make payments. Property and your home
If you own property then this might be sold depending on whether it has any equity (value) in it. If your partner and children live there then the sale can be delayed for 12 months to give them time to find somewhere else to live.
Once you have gone bankrupt your interest in your home is transferred to the official receiver or trustee. This enables them to sell the home.
If you are the sole owner then the whole of the value of the property is transferred to the official receiver or trustee.
With jointly owned property the official receiver is usually only entitled to the bankrupt person's share of the equity. This is called your 'beneficial interest'.
Depending on your circumstances, you may be considered to have a beneficial interest even if you are not named on the mortgage. This is a complex area so.
It may be possible for the joint owner or family and friends to make an offer to the official receiver to buy out your share of the equity. This is particularly helpful if there is little or no equity. REMEMBER
It is very important that your beneficial interest in your home is bought out as soon as possible or the official receiver may be able to sell the house, even if you have been discharged from bankruptcy.
If someone is willing to buy your beneficial interest in the home they should contact the official receiver or the trustee who is handling your bankruptcy. The Insolvency Service runs a low-cost conveyancing scheme to organise the transfer of your beneficial interest to someone else.
There are various fees to pay to cover the cost of this. You will also have to agree with the official receiver how much your beneficial interest is worth before this can go ahead. If there is negative equity or no equity in the property then the value of the beneficial interest can be set at a minimal amount of £1. INFORMATION
For details of the low-cost conveyancing scheme there is a leaflet called 'What will happen to my home?' available from the Insolvency Service or. If you cannot save your home through someone buying out the official receiver's interest the property is likely to be sold.
If your home has very little equity in it (up to a set level of £1,000), then the court will not be able to order a sale or put a charging order on your property. They still have up to three years to see if your house has risen in value and is worth selling. Try to come to an agreement with the official receiver over your beneficial interest as soon as you can to avoid this happening.
If you have a mortgage or secured loan on the property the monthly payments still need to be maintained to stop your lender taking possession action. New rules from April 2004
If you went bankrupt before April 2004 then it was the case that the official receiver could come back at any time in the future and sell your property. This has now changed. The official receiver has three years from 1 April 2004 to deal with their interest in your property. After this date, if no action has been taken, your home will belong to you. This will apply to you if you are already bankrupt on that date or are made bankrupt in the future. The official receiver will have these options: come to an agreement with you about the property;
sell your home;
apply for an order for sale;
apply for a charge on your home.
This means that you should not be left with the possibility of the official receiver coming back years after your bankruptcy has ended wanting to sell your home unless a charge is placed on your home. In this case the official receiver can ask the court for an order for sale at any time in the future. Otherwise, the charge will be paid off when you sell you home (if your house is worth enough to cover your mortgage and the charge).
Will I have to pay anything from my wages?
This will only happen if your income is above the average and it appears that you might have available income after paying ordinary household expenses. The official receiver can look at your income and expenditure and decide if payments should be made and at what level. When looking at how much you could pay they will take into account essential expenses such as your mortgage, rent, household bills and housekeeping.
Income Payments Orders & Income Payment Agreements
Under the Enterprise Act most bankruptcy orders will end after one year. You may be asked to sign a legally binding agreement to pay monthly instalments from your income to the official receiver for three years from the date of the agreement. This is called an income payments agreement. If your circumstances change then you need to tell the official receiver as the agreement can be looked at again. If you do not pay the official receiver can go to court for an income payments order instead. If you do not make a voluntary agreement then the official receiver can ask the court to order you to pay the instalments they want. This is called an income payments order and will run for three years from the date of the order. You can ask the court to look at this order again if your circumstances change. The effects of Bankruptcy
You will usually have to close your bank or building society account when you are made bankrupt. You may be able to open another one as long as the bank or building society allows you to, and the official receiver gives you permission to do so. It is important to wait to open the account until after you have gone bankrupt and got the official receiver's permission.
INFORMATION
We have details of instant access type accounts that allow you to have a cash card but no cheque book or cheque guarantee card. Phone us for advice.
Gas, electricity and telephone companies usually want you to pay in such a way that involves you not having credit. If you live with a partner you could transfer the account into their name. Sometimes a deposit is also asked for as security.
A business that is trading will normally be closed down. You can continue to be self-employed but some people find it difficult if it is the type of work which involves using credit of more than £500. This can include having time to settle bills e.g. allowing 30 days to pay.
Depending on the type of job that you do your employment may be affected. Always check your contract of employment to see if bankruptcy is mentioned. You can also ask your staff welfare officer or trade union if you are uncertain. If you belong to a professional body which prohibits bankruptcy you could be struck off, e.g. solicitors or accountants.
WARNING
If you handle money your employment could be at risk. If you work in the finance industry you will lose your consumer credit licence. Even after the bankruptcy period you may find it difficult to obtain credit. The bankruptcy order will be registered with credit reference agencies for at least six years and even after this time you may be asked whether you have ever been bankrupt before when applying for some credit, particularly a mortgage. Details of your bankruptcy are also kept on the Individual Insolvency Register for three months after the date of your discharge from bankruptcy.
Bankruptcy offences
Whilst you are bankrupt it is a criminal offence to:
1.take out credit of more than £500 without telling the lender you are bankrupt;
2.use a new business name without revealing the name you were made bankrupt under;
3.act as a director of a company without permission;
4.act as an insolvency practitioner. Bankruptcy restriction orders
Under the Enterprise Act you will usually be discharged from bankruptcy after one year. New rules have been brought in that give the court power to make a bankruptcy restriction order against you if the official receiver feels your behaviour has been dishonest in some way or there has been 'unfit' conduct. WARNING
A bankruptcy restriction order can last for between two and 15 years and will appear on a public register and on the Insolvency Service website It will also include information on how long the order will last. If you break the order it can be a criminal offence. Unfit conduct can include:
1.not keeping proper accounts for your business in the last two years before you go bankrupt;
2.gambling;
3.trading whilst you knew you couldn't pay your debts;
4.taking out credit which you knew you couldn't pay;
5.giving away your assets to avoid them being included in the bankruptcy;
6.paying some creditors over others;
7.failing to cooperate with the official receiver;
8.concealing property from the official receiver.
A bankruptcy restriction order means you are not allowed to:
1.apply for credit over £500 without telling the lender about the order;
2.become an MP or local councillor;
3.be a director of a company or form a new company without permission;
4.be an insolvency practitioner.
WARNING
A bankruptcy restriction order does not stop the official receiver from taking criminal proceedings for an offence such as selling goods you have on a hire purchase agreement or for putting false information on a loan application.
Discharge from Bankruptcy
Under the Enterprise Act 2002, if you go bankrupt on or after 1 April 2004 you will usually be automatically discharged from your bankruptcy after one year however much you owe. If you cooperate with the official receiver this can happen even earlier. WARNING
These rules do not apply if you have had a previous bankruptcy or your automatic discharge has been suspended. This may be because the official receiver stops your discharge going ahead if you do not cooperate whilst bankrupt.
If you need proof of your discharge you can ask the court for a certificate of discharge but this will cost £60. You can also apply to have your bankruptcy annulled if you have paid all the debts and expenses of the bankruptcy in full, or a bankruptcy order should never have been made. If you want further information on these points. Alternatives to Bankruptcy
Individual Voluntary Arrangements
An individual voluntary arrangement (IVA) is a formal arrangement through the county court and can be a way of avoiding bankruptcy. You need to be able to raise a lump sum to pay the creditors or to make regular payments from your income to your creditors. To arrange one you need to find an insolvency practitioner prepared to work for you. The insolvency practitioner prepares a proposal to put forward to your creditors. If the creditors who are owed 75% in value of your debts, who choose to vote, agree to accept the proposal then the IVA is put in place. INFORMATION
An IVA will usually last for three to five years. If the arrangement is not kept to, the insolvency practitioner or your creditors can apply for a bankruptcy order to be made instead. Insolvency practitioners' fees can be expensive and they will usually want some payment in advance. It is worth asking them for an initial free meeting to discuss whether an IVA is appropriate. INFORMATION
You can obtain names of local insolvency practitioners by contacting the court offices, official receiver in your area.
WARNING
Be careful of companies who offer to put you in touch with an insolvency practitioner for an up-front fee. You can contact an insolvency practitioner yourself without paying a fee to a third party. FACT SHEET
We have a fact sheet on 'Individual voluntary arrangements', which may be of assistance to you.
Fast Track Individual Voluntary Arrangements (FTVA)
Even if you have been made bankrupt it is still possible to have a special form of IVA called a fast track individual voluntary arrangement (FTVA), which means your bankruptcy order can be annulled. You have to put forward a payment proposal to your creditors that would mean they will be paid more than they would under your bankruptcy.
The official receiver runs the FTVA for you if they agree with your proposal. The FTVA is cheaper then an ordinary IVA as there are set fees and costs. If it fails then your creditors could try to make you bankrupt again. WARNING
You need to carefully weigh up the advantages and disadvantages of asking for an FTVA. Phone us for advice.
Informal arrangements and Debt Management Plans
If bankruptcy or an IVA are not suitable options you may be able to make informal arrangements with your creditors. Our self-help pack 'Dealing with your debts' goes through how to negotiate with your creditors. If you have not had a copy of our pack. If you would like an organisation to act on your behalf to negotiate affordable payments you might want to consider a free debt management plan (DMP). This is a repayment schedule for unsecured debts. |