Personal Bankruptcy

Before you are made bankrupt by a creditor or apply for your own bankruptcy, our professional advice can help you avoid this last resort option.

There are certain situations where applying for bankruptcy may be your best option but if you are contemplating this course of action, or are in the process of being made bankrupt then there are ways in which your debt problems can be legally resolved without you having to take such drastic measures. We are fully authorised to provide you with a complete range of bankruptcy avoidance options whether you are homeowner or tenant; self employed or on PAYE. Whatever your circumstances there maybe a better way to gain you a second chance.

What is bankruptcy?

Bankruptcy is a means by which an individual consumer or Sole Trader/informal partnership business, with overwhelming debt problems, can ask the Court to provide protection from creditors while the debtors financial affairs are sorted out. Likewise a creditor who is owed money (more than £750) can ask the same Court to declare a debtor bankrupt and recover available assets to pay off such debts. Bankruptcy is meant to provide a debtor with a fresh start to his/her financial life by wiping the slate clean. However, there are a number of issues which all debtors need to be aware of before any such drastic steps are taken.

Bankruptcy Legislation

The current legislation on bankruptcy is found in The Enterprise Act 2002; the provisions relating to personal bankruptcy being finally brought into law from 1st April 2004.

The main provisions are

• All first time, non fault, personal bankruptcies shall now only last for a maximum of 12 months before formal discharge.
  
• The debtor may be issued with an Income Payments Order (IPO) asking them to make monthly payments to help discharge the debts for up to 3 years.
  
• In exceptional cases the debtor may be issued with a Bankruptcy Restriction Order (BRO) which limits his/her ability to obtain further credit if the debtor has been reckless in previous borrowing. A BRO can last for up to 15 years.
  
• The Official Receiver (appointed by the Court to administer the bankruptcy) has up to 3 years in which to dispose of any of the debtors major assets (usually the home) to help repay creditors.

Advantages of Bankruptcy

• You immediately become protected by the Court from all your creditors’ debt recovery actions.
  
• The Court appoints someone, either the Official Receiver or a nominee, to “step into your shoes” and deal with all your financial affairs on your behalf
  
• Once your bankruptcy is officially discharged most of your debts will be written off and you can start afresh.

Disadvantages of Bankruptcy

• Bankruptcy Orders are still announced in the local press where you are resident
  
• You may be under restriction through an Income Payments Order for up to 3 years.
  
• If you have assets – home; expensive car; valuable possessions; (even if they are jointly owned with a partner or other party) they may have to be sold to help discharge your debts.
  
• A bankruptcy Court Order legally overrides any attempts to give away interests in property to third parties unless a fair market value is paid (you cannot simply transfer the marital home across to your wife in contemplation of applying for bankruptcy at a future date).
  
• Entitlement to future assets could be caught within the terms of a bankruptcy – bequests in wills or an increase in future earning capacity could potentially be forfeited for the benefit of your creditors.
  
• You will have to pay an upfront fee to apply for your own bankruptcy. The fee varies depending upon an individual circumstance but is a maximum of £460 per person from June 2006.
  
• You may find it very difficult to obtain a bank account up to your discharge.
  
• You will not be able to work in certain professional capacities or you will have to disclose your bankruptcy when applying for certain jobs for a period of time after the bankruptcy.
  
• If you are renting then your property landlord may need to be informed. 

Related links:
Bankruptcy Law and Procedures
Alternatives to Bankruptcy

If you want more information on how you can avoid bankruptcy, gain complete financial freedom and consolidate your unsecured debt then please call us on 0800 043 50 43 or complete our enquiry form and let us advise you properly.

Alternatively if you have any specific questions about bankruptcy or its alternatives then fill in the below form. Just enter your query and one of our groups impartial debt advisors will get back to you.