Banruptcy Info
There are now new bankruptcy rules known as 'The Enterprise Act'.
If after considering all of the alternatives you decided that you still have no realistic chance of clearing your debt, you can petition for your own bankruptcy at your local county court. The cost for a personal bankruptcy petition is £450 which includes £140 court fees + £310 Official Receivers fees, However, people on means tested benefits may be exempt from or pay a reduced Court Fee (ask court for details). For an additional fee we can help you fill in your bankruptcy petition.
The main disadvantages of bankruptcy include stigma, possible job loss, liquidated assets including your property, loss of office and a chronic credit record. However, bankruptcy may still be a realistic solution if these disadvantages are acceptable or of no consequence. Normally people would only voluntarily declare themselves bankrupt if they had few or no assets to protect, therefore reducing the impact it had on them. There are certain assets that are excluded from bankruptcy such as personal possessions, household furniture, clothing, tools of the trade and certain pension entitlements.
However, if you do have assets that are not excluded such as equity in your property then these assets will need to be realised and paid into your bankruptcy estate. This can be achieved either by the introduction of third party funds or through the sale of your property. If there are assets that need to be sold then this is handled by an Insolvency Practitioner who in the case of a bankruptcy is appointed as the trustee in bankruptcy. In effect any assets of the debtor that need to be realised become the trustees responsibility to sell. Also, any assets you acquire during your bankruptcy will become the property of the trustee.
One positive step is that the family home will not be at risk for so long. Previously creditors could wait for any number of years before demanding equity to be released from a property but this has been capped at three years under the new act. This is a double edged sword in that action can be expected from the Trustee sooner, rather than later.
Depending on your earnings, your trustee may require you to make contributions to your creditors out of your income. The amount that is paid to creditors is determined by the amount that the debtor can reasonably afford after their normal cost of living expenses have been deducted from their income. This is called an income payments order (IPO) and it will remain in force for 3 years from the date of bankruptcy.
This means that even though you have been discharged from your bankruptcy after 1 year you will still have to continue paying your IPO for a further 2 years.
It is unusual for a creditor to petition for a debtors bankruptcy if there is little chance of retrieving any of their capital. However, in some cases this can happen. For example: if a creditor ran out of patience with a debtors promises to pay or they operate a strict bankruptcy policy. Creditors would much prefer an alternative that a least gave them a chance of a percentage recovery.
Under the new legislation your discharge from bankruptcy will take effect 12 months (or even sooner if the Official Receiver decides not to investigate further) from the date of your bankruptcy. Although discharge times have been reduced there is a sting in the tale...for the first time, your conduct immediately before going bankrupt could go against you. If you are found to have been dishonest or reckless, the Official Receiver can impose a Bankruptcy Restriction Order, which could extend the restrictions imposed by your bankruptcy to between 2 and 15 years. Misconduct prior to 1 April 2004 will, however, not be taken into account. Any Bankruptcy Restriction Order will be registered.
There used to be separate discharge times that applied to people who were in a second bankruptcy but this is now irrelevant, unless this is your second bankruptcy in 15 years.
Even after your discharge it will be difficult to get credit. The court records will show your bankruptcy for 6 years before becoming out of statute. However, credit reference agencies may well keep it on record for a lot longer even though it should be removed from their records at the same time. All lenders check these records when they are considering an application for a loan or mortgage.
If you have been unfortunate enough to have had a bankruptcy petition filed against then you should seek professional advice as soon as possible. Or if you have been made bankrupt recently all may not be lost as you may still be able to have the bankruptcy annulled in favour of an Individual Voluntary Arrangement.