Bankruptcy is one of a number of options available to resolve a debt problem. It is an option that is available to both the person in debt and to the creditor.
Once you have been made bankrupt, you will no longer have to deal with your creditors.
Instead an official appointed by the court called the Official Receiver will effectively take over control of your money and property, and deal with your creditors. Bankruptcy is processed through the courts and if you are considering bankruptcy as an option or are faced with a creditor who is intending to apply to have you made bankrupt you will need to take expert advice.
Remember, bankruptcy might not be your only option and it might not be the best one for you.
What are the advantages of going bankrupt?
There are considerable advantages in opting to go bankrupt. These include:
- The pressure of dealing with demands from your creditors is removed
- You can make a fresh start when the bankruptcy order is over which can be in as short a period as one year
- You are permitted to keep certain things, like household goods and a reasonable amount to live on
- The money you owe can usually be written off.
What are the disadvantages of going bankrupt?
There are fees involved in going bankrupt.
The fees are:
- £525 for managing your bankruptcy
- £180 for court costs – you may not have to pay this if you’re on income support
You can pay using cash, postal orders or a building society, bank or solicitor’s cheque made payable to Her Majesty’s Courts and Tribunal Service. The court won’t accept your petition unless the fees are paid. Citizens Advice can tell you about any charities in your area that can help pay the fees.
It may cost more than this, for example if you use a solicitor or have to sell your home using an estate agent.
Other disadvantages include:
- Whilst you are bankrupt you will not be able to apply for credit of more than £500 without disclosing your status
- If you are a home owner with equity in the property, your home may be sold to pay some of your debts (although you may be able to apply to your local authority for re-housing)
- Although you can keep household goods and a reasonable amount to live on, your car, and any items considered as luxury may be sold
- Some professions will not allow people who have been made bankrupt to continue working
- If you own a business this will probably be closed, and the assets sold to help meet debts
- Immigration status can be affected
- Your bankruptcy will be published on the internet and your case could also be published in your local newspaper
- Even when bankruptcy is over further bankruptcy restrictions can be put in place if you did not co-operate with the Official Receiver, or took on debts in the knowledge that you could never expect to meet your commitments
- There are some debts including court fines and student loans that will never be written off.
- Although creditors have to stop most types of court action following a bankruptcy order, in some cases bailiffs may still be able to remove your possessions.
How do I go bankrupt?
You will need to apply to court. This will usually be the county court in the area where you have lived for the last six months although it can sometimes be where you work. In London, you apply to the High Court. Your local county court or the High Court will advise you about which is the appropriate court for you. Before commencing bankruptcy ensure you have enough cash for day-to-day expenses as once a bankruptcy order is made, your accounts will be frozen.
You will need to have enough money for the fees.
Copies of the appropriate forms are available from your local court, or from the Insolvency Service website. You can complete the forms online. www.gov.uk/government/organisations/insolvency-service
Insolvency Enquiry Line: 0300 6780015 Monday to Friday 8am to 5pm
Once you have sworn your forms, the court may either fix a time for the hearing or hear your case straight away. If your case is in the county court, you will have to attend the hearing.
What happens at a bankruptcy hearing?
The court will decide whether to accept or reject your application. The application may be rejected if the court considers there is a better solution to your debt problem.
Once the bankruptcy order is made, all your bank and building society accounts will usually be frozen immediately. Your assets will come under the control of the Official Receiver.
The Official Receiver will tell your creditors about the bankruptcy with a summary of your financial situation. Any assets you own will be sold to pay off some or all of your debts. The costs of the bankruptcy including Official Receivers fees are the first priority from any money that is available.
When does bankruptcy end?
The Official Receiver will notify you when the bankruptcy is over which will normally be after one year. In some cases it can be less than a year if you have co-operated fully. Most debts that haven’t been paid will be written off.
Further help
The Insolvency Service
Enquiry line: 0300 678 0015 – Information about bankruptcy is available from the Insolvency website or to order. Information is also available in languages other than English.
Citizens Advice Bureau
Citizens Advice Bureau give free, confidential, impartial and independent advice to help you solve problems. To find your nearest CAB, including those that give advice by e-mail, click on nearest CAB, or look under C in your phone book.
Payplan
Tel 0800 2802816 – Comprehensive advice and support on debt problems
workplacewellbeing.com assumes no responsibility for the content of linked websites.
