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Bankruptcy

Bankruptcy is a formal solution where you legally declare your inability to pay your debts. It may be considered as a "last resort" debt solution, but it can allow you to make a fresh start and be debt free in 12 months.

Bankruptcy comes with some serious implications that you might want to consider carefully as there may be alternative debt solutions available to you. It should be noted that you can declare yourself bankrupt which is known as a Debtors Petition, or alternatively one of your creditors that you owe more than £5,000 to may seek to make you bankrupt. This is known as a Creditors Petition.

Pros of Bankruptcy

  • It allows you to make a fresh start.
  • You could be debt free within 12 months.
  • Bankruptcy could write off all your unsecured debt (see exceptions in Q & A below)
  • Creditors cannot take further action, unless the debts are secured on your property.
  • You may be able to avoid having to sell your home if your spouse, partner or a relative can buy your share of it's value, after any debts secured on it have been paid.

Cons of Bankruptcy

  • Your bankruptcy is entered on a public register and is advertised.
  • Some debts will survive your bankruptcy (see exceptions in Q & A below)
  • You cannot hold position of company director without court permission.
  • A record of the bankruptcy will remain on your credit file for six years.
  • Certain professionals are banned from practising if made bankrupt.
  • You cannot obtain credit in excess of £500 without disclosing that you are bankrupt.
  • Any surplus income in excess of £20 is likely to be requested in an Income Payments Order which would have to be paid to the Official Receiver (OR) each month for 3 years.

Avoid Bankruptcy

If you are being made Bankrupt or you are struggling with your debts and think Bankruptcy is your only option, there may be a better alternative for you. There are a range of Debt Solutions available in the UK that could be more beneficial for your situation than Bankruptcy.

The alternative debt solutions available range from informal agreements such as a Debt Management Plan, to more formal agreements such as a Debt Relief Order, IVA or Trust Deed (for residents of Scotland). There are also more alternative solutions such as Remortgaging and/or Debt Consolidation for those of you who are homeowners.

No Debt Solution should be entered into lightly. You want to make sure you are opting for the best choice for your situation. The best way to find out all of your options is to speak to one of our experienced Debt advisors, who will do an analysis of your current situation, including your debts, incomings, outgoings etc... They will then go through ALL of your options and suggest what is best. It is then up to you to think about how you would like to proceed.

We could help you to:

  • Reduce your monthly debt repayments to something more manageable
  • Get a percentage of your debts written off
  • Avoid Bankruptcy
  • Avoid Repossession

Bankruptcy Q & A

Below are a few of the frequently asked questions we are asked in relation to Bankruptcy. If you have any questions please feel free to get in touch and we will find the answers you need.

Bankruptcy is a legal process where you are declared unable to pay your creditors. You can petition for your own bankruptcy (Debtor's Petition) or a creditor/s can petition (Creditor's Petition) for your bankruptcy if who you owe them more than £5,000.

It costs £680 to go Bankrupt yourself. If you are interested in Bankruptcy you can seek further information on the Insolvency Service website.

When a Bankruptcy Order is made against you your case will usually be handled by an Official Receiver who works for the Inslovency Service. They will review the information and contact you within 2 weeks of the order being made. You must ensure that you cooperate fully with the Official receiver and provide any information that they require. You will also be required to attend an interview with the OR. This can be conducted in person or by telephone. They will determine if there is any money available for creditors and discuss how they propose realising this money.

If you have any equity in your home, the Official Receiver or the Trustee (if an Insolvency Practitioner has been appointed in place of the Official Receiver) may have to sell your home to help pay your bankruptcy debts.

Your husband, wife, partner, a relative or friend may be able to buy your beneficial interest in the home. This will stop the Official Receiver or Trustee selling your home.

Beneficial interest is your interest in the proceeds of sale of the property. If there are joint owners, the beneficial interest is usually an equal share.

The Official Receiver or Trustee can only take into account assets in your name. You must ensure you maintain your rental payments and adhere to your tenancy agreement or your landlord can take action against you.

There are some debts that are not included and will not be written off on the completion of your bankruptcy. These include

  • Court fines
  • Any debts obtained fraudulently
  • Any debts owed under family proceedings, unless otherwise directed by the court
  • Any outstanding student loan debts
  • Damages for personal injuries owed to anyone, unless otherwise directed by the court
When you are declared Bankrupt you are allowed to retain your personal belongings which you require for essential everyday use, such as white goods, television, tables, chairs sofa etc... Any assets deemed to be of value and not essential may be seized by the Official Receiver and sold for the benefit of your creditors.

When the bankruptcy order is made, you must immediately stop using your cheque books and bank cards and hand them over to the official receiver as soon as possible.

All your bank accounts will usually be 'frozen' by the banks when they become aware of the bankruptcy order - so you will need to make alternative arrangements for your income and essential direct debits.

After the bankruptcy order, you may open a new bank or building society account, however you need to disclose that you are bankrupt. It is at the discretion of the bank or building society whether they will let you operate a bank account, and they may impose conditions and limits.

Find out your options

There are other debt solutions available that should be considered before bankruptcy such as an IVA, Debt Relief Order and Debt Management. If you would like more information on all of your options please call our Debt Advisors on 0800 043 0200 and they can answer all of your queries.

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Debt Solutions is part of National Debt Relief. We are a private company offering debt advice and solutions for people in debt. We will talk you through the options that are available to you. If you decide to go for one of our solutions there will be a charge for this service. Fee information You can get free debt advice from the Money Advice Service – an organisation set up by the Government to offer free and impartial advice to those in debt. Click here for more information.

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