• There is life after debt

    Do Not Panic

    There is life after debt

What is Bankruptcy?

You are not bankrupt simply because you cannot pay your debts. A person is officially a bankrupt if the Court makes a Bankruptcy Order against them. It is unlikely that a person could be bankrupt without knowing it has happened, as documents telling them about the Court hearing generally have to be personally served on them, in advance.

Any unsecured creditor can make you bankrupt, provided that you owe them more than £750. In practice, it is people who run their own business that are the most likely to be made bankrupt by someone else, as the tax authorities widely use the bankruptcy process. However, some banks and credit card companies also use bankruptcy in an attempt to recover their money.

If someone files for your bankruptcy, you will receive notification of a Court hearing date. You do not have to attend at Court, but if you do not, it is highly likely that you will be made bankrupt anyway.

Alternatively, you can make yourself bankrupt by applying to Court and paying a Court fee of £175 plus a deposit of £525 [as at October 2014]. Bankruptcy can be the best option for some people; usually those with the least to lose by it.

Currently, around 78% of bankruptcy orders are made on “debtors own” petitions.
[Insolvency Service Official Statistics for the first quarter of 2014]

Once you have been declared bankrupt, either by a creditor or by yourself, you must then go and see the Official Receiver to tell him about your circumstances. You also become automatically subject to a number of legal restrictions.

Bankruptcy usually ends automatically after 12 months (called “discharge”) although this period can be extended if the Official Receiver or Trustee has uncovered adverse or reckless conduct. However, discharge from bankruptcy only removes the restrictions of bankruptcy (such as not acting as a company director) and does not affect the assets that have been claimed as a result of the bankruptcy or the role of the Trustee. This is a commonly misunderstood aspect of bankruptcy.

The Official Receiver and Trustee

People that are declared bankrupt are required, by law, to make an appointment to see their local Official Receiver to provide information about their assets and liabilities and the reasons why they are insolvent. If they do not attend and cooperate in providing information then their automatic discharge from bankruptcy will be suspended.

At the Official Receiver’s Office, they are given a lengthy questionnaire to complete and will be interviewed by a member of the Official Receiver’s staff. For many people, this will be the only time that they need to go to the Official Receiver’s Office.

Once the Official Receiver has the information that he needs, he will decide whether or not the case would be better handled by an outside Trustee or whether he himself should become the Trustee. In some cases the creditors may insist that an outside Trustee is appointed, particularly if there are aspects of the case that they feel require closer investigation. The bankrupt person never gets any say in who is appointed.

An outside Trustee will be a Licensed Insolvency Practitioner from private practice (such as PCR). His job is to sell off the bankrupt person’s assets and to use this money to pay the costs and fees of the bankruptcy (including his own fees), and then share what is left amongst the creditors as dividend payments. This task is largely unaffected by the bankrupt’s discharge.

Bankruptcy is an extremely serious step

Bankruptcy may be the best alternative where you have little in the way of income or assets, but you should always discuss the alternatives with a professional adviser (such as PCR) prior to presenting your own petition.

There may be alternatives to bankruptcy of which you are not fully aware, and there may be implications of bankruptcy which have not been properly explained to you.



The Insolvency Service 'Guide To Bankruptcy' 
This guide tells you what happens if you are made bankrupt in England and Wales.
Link to www.gov.uk ››


The Insolvency Service 'Options for paying off your debts'
Guidance on possible alternatives for those that find themselves in debt.
Link to www.gov.uk ››


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