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Bankruptcy order

The first step in bankruptcy is the bankruptcy order: a legal declaration made by a court that you are now officially bankrupt. A Trustee is appointed, who will be either the Official Receiver (an officer of the court) or a licensed Insolvency Practitioner.

Bankruptcy orders are made in response to petitions, presented either by you or one of your creditors. Petitions are usually presented either at a County Court near you or the High Court in London. Once the order has been made, your creditors cannot pursue you for their debts any more. Instead, they must deal with the Trustee of your bankruptcy.

Examination of your finances

Once the bankruptcy order is in force, the Trustee sequesters (takes over) all your assets. They will then go through them in detail to determine what can be liquidated (sold) in order to generate cash to pay your creditors. To allow this to happen, you will have to hand over all available information on your financial affairs, including a list of assets and everything you owe, with a list of creditors. Documents such as bank statements and insurance policies will have to be supplied, to back up your statements. You must do this within three weeks of the bankruptcy order being made.

While the bankruptcy order is in force

Your bankruptcy order will usually last for one year, although your discharge can be postponed by the court.

While the bankruptcy order is in force, there are number of restrictions on what you can and can’t do:

• You can’t obtain credit of more than £250 without revealing that you are bankrupt.
• You can’t use your bank or building society accounts.
• You must tell the Trustee about any increase in assets or income during your bankruptcy.
• You must not make any direct payments to your creditors. The Trustee will handle payments to your creditors on your behalf.

After bankruptcy

Once you are discharged from bankruptcy, usually after one year, you are freed from your obligations under the bankruptcy order. You will be free from most of the debts that you had at the time of order (the exceptions being debts arising from fraud or crime, and fines). Some debts can only be released if the Court agrees to them.

If you have been bankrupt before, your discharge from bankruptcy does not happen automatically. Instead, you must apply to be discharged five years after the date that your current bankruptcy order was made. Even then, the court may decide not to discharge you from bankruptcy.

You still have a duty to assist the Trustee, even after discharge from bankruptcy. In particular, you must let them know about any assets you have obtained in the time before your discharge. They could be used to pay creditors.

To learn more about how bankruptcy works and your options while a bankruptcy order is in force, contact Debt Options, or call us on 0800 234 3605.