Do these apply to you?
What is Bankruptcy?
Bankruptcy is a method of dealing with debts which you can not possibly repay. It is normally seen as a last resort after all other options for repaying debt have been exhausted.
If you are declared bankrupt, you will no longer have to repay your creditors yourself and the court will protect you from any further actions that your creditors threaten against you.
What happens to my property and belongings?
As a bankrupt person, you will be expected to make your best effort to repay what you can to your creditors through the court. This may involve making regular monthly payments to the court based on what you can afford. You will normally be able to keep reasonable personal items and household goods as long as their value is not greater than the cost of their reasonable replacement. However, you will be expected to sell valuable assets such as property, expensive jewellery, antiques and expensive vehicles.
As a bankrupt person, your home may have to be sold to go towards paying your debts. If your husband, wife or children are living with you, it may be possible to put off the sale until the end of the first year of your bankruptcy to give time for other housing arrangements to be made. Your spouse or any other interested party would be encouraged to take legal advice about the home as soon as possible.
How long will my bankruptcy last?
Generally your bankruptcy will last between 2-3 years. You are then discharged from your bankruptcy. After being discharged, you are released from most of the debts you owed at the date of your bankruptcy order. Exceptions include fines, debts arising from fraud and certain other crimes.
When you are discharged you can borrow money again and carry on business.
How to make yourself bankrupt
Anyone can go bankrupt. The first step is contact your local County Court (you will find the address and telephone number of your local County Court in the telephone book). You will have to ask the court for an application form. The court will also be able to provide you with further information.
You will normally have to arrange a meeting at the court with a member of the Official Receiver's office where you will discuss all aspects of your application. If the Official Receiver believes that you should go bankrupt then you will be able to do so on the same day. You must expect to pay a fee to the court of between £250-£350 towards the court fee and administration of your bankruptcy.
The advantages of Bankruptcy
- Responsibility for paying your debt is taken away from you immediately and you are protected from your creditors by the court.
- You may have to make a monthly contribution towards your debt while you are bankrupt but this is based only on what you can afford.
- You will normally be debt free in 3 years or less.
The disadvantages of Bankruptcy
- You will have to pay an up-front court fee and administration charge to the court of between £250 and £300.
- You will be required by the court to realise valuable assets e.g. equity on your home, expensive jewellery, antiques, expensive cars etc.
- Bankruptcy is a public proceeding and your name will appear in the local paper and the London Gazette.
- You cannot continue to practise as a professional person or a director of a company during the period of bankruptcy.
- A note of your bankruptcy will be kept on your credit file for 6 years meaning that after release from your bankruptcy you may find it difficult to take credit or a mortgage during this time.