Bankruptcy Advice
In many ways, bankruptcy is the ‘last resort’ for those with overwhelming debts. It is an expensive, time-consuming and difficult legal process. In most cases, it is worth looking at alternatives such as Individual Voluntary Agreements (IVAs), Debt Management Plans or (in Scotland) Trust Deeds before contemplating bankruptcy. However, there are circumstances when bankruptcy is the best (or only) option for dealing with debt problems.
To learn more about bankruptcy and decide whether you should consider opting for bankruptcy, read this page and contact us
What is bankruptcy?
Bankruptcy is one of the options available to people who cannot pay their debts. If you are declared bankrupt, your assets are taken away (sequestered), sold (liquidated) and used to pay your creditors. Your bankruptcy will be publicised, and there will be a thorough investigation of all your financial affairs in order to determine how much money can be realised for creditors from your assets. Bankruptcy ensures that all your assets are shared out fairly between your creditors.
Bankruptcy allows you to make a fresh start, free from debt. Following a set period (probably one year for first-time bankrupts) you will be ‘discharged’ from bankruptcy. You will then be free to start afresh, although you will be subject to some limitations.
Bankruptcy can happen in one of three ways.
- Firstly, people can declare themselves bankrupt, and go into bankruptcy of their own free will. They might do this if they feel they cannot deal with their debts by any other means.
- Secondly, a creditor who is owed money can take bankruptcy proceedings against a debtor, provided they owe them at least £750. A creditor might do this if they believe that instigating bankruptcy proceedings represents the best chance of them retrieving all or part of what they are owed.
- Thirdly, bankruptcy may be initiated by the supervisor of an IVA, or anyone bound by it.
However your bankruptcy begins, a court will make a bankruptcy order against you. Your assets are then placed under the control of a Trustee – either the Official Receiver or a licensed Insolvency Practitioner. The Trustee then works to discover as much as they can about your assets and liabilities, with the aim of maximising the returns for creditors from your bankruptcy.
Once a bankruptcy order has been made against you, your creditors cannot pursue you for payment. Instead, payment is dealt with by the Trustee.
It’s important to understand that you can be made bankrupt without your consent. Even if you ignore the proceedings, you can still be declared bankrupt. Therefore, it’s crucial to get involved with the proceedings, disputing claims if need be, rather than waiting until after a bankruptcy order has been made.
The consequences of Bankruptcy
Unlike the other debt solutions available on this site, bankruptcy places a number of restrictions on you. The most important ones are that you lose control of your assets, you cannot be a company director, you cannot form a company without the court’s permission and your credit will be adversely affected for many years after your bankruptcy.
Bankruptcy requires serious consideration before moving forward and it can help to get expert advice. To learn more contact Debt Options, or call us on 0800 234 3605 to discuss the options.
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