DEBT SOLUTIONS

Bankruptcy in England

DEBT SOLUTIONS

Bankruptcy in England

Overview

In most instances the Debtor will be require to make payments for a further two years. Bankruptcy is often considered as an alternative to an IVA in England. Please note that Bankruptcy in England, though very similar, is distinct from Bankrutpcy in Scotland which is also known as Sequestration.

Involuntary Bankruptcy is when a Debtor who is unable or refuses to repay their debt is declared bankrupt as a result of a formal legal process which results in a court issuing a bankruptcy order. Creditors can apply to have someone declared bankrupt, provided they owe them £750 or more.

Voluntary Bankruptcy is when a Debtor applies in their own right to be declared bankrupt as their debts are greater than their assets. This option is more likely to be exercised if the Debtor either does not qualify for an IVA, or has had their IVA application rejected.

In the event of a Bankruptcy (voluntary or involuntary) the assets belonging to the Debtor are given to the Trustee who is responsible for managing your Bankruptcy (an Insolvency Practitioner or an Official Receiver) who will realise those assets in order to make payments to your Creditors.

There are negative short-term and long-term effects for people who have been declared Bankrupt. For the duration of the Bankruptcy, you are subject to certain restrictions such as being unable to borrow money and being barred from becoming a company director.

Check if you qualify

 

Step 1

You should firstly consult with a recognised money adviser, who can explain all the options to you. You can use our Debt Calculator which will return indicative minimum payments for respective debt solutions based on your debt level. (We also ask for some contact details so we can provide detailed debt advice as the calculator is only indicative.)

After consulting with a debt advice provider you can choose to apply for Bankruptcy if you are unable to pay your debts or a Creditor to whom you owe £750 or more can apply to have you made bankrupt. The application must be made formally to a court and you will have to pay fees totalling £700 (it may be less if you are on income support

Step 2

You will receive an information pack from the court and you may be interviewed (either in person or by phone) by the Official Receiver to check details of your debts, assets and income and the circumstances of your Bankruptcy. If the court rules that you are eligible, a Bankruptcy order will be issued.

Step 3

Your assets will now be controlled by the person responsible for managing the Bankruptcy – either an Insolvency Practitioner or the Official Receiver. They will take charge of selling assets to repay debts to Creditors. You will be subject to certain restrictions for the duration of the Bankruptcy which is usually 12 months. These include borrowing more than £500 without informing the lender of your bankruptcy and holding company directorships.

Step 4

At the end of the 12 month period, provided you have complied with the terms of the Bankruptcy order, you will be discharged from Bankruptcy and your debts written off (subject to some exclusions). However, depending on your level of disposable income, you may be required to make payments to Creditors for up to a further two years. Your Bankruptcy will remain on credit files for six years.

Advantages of Bankruptcy

  • Bankruptcy allows you to write off your debt in 12 months
  • Creditors can no longer contact you directly for payment and must communicate through the official receiver
  • You will be able to keep enough money to live on, as well as essential possessions required for basic domestic needs
  • You can keep any items vital for trade work if you’re self employed
  • If your home has little equity in it, you may be allowed to keep this
  • If deemed essential for work, and worth £1,000 or less, you’ll be allowed to keep a vehicle

Disadvantages of Bankruptcy

  • Bankruptcy will have a negative affect on your credit report and remain there for at least six years after you have been discharged.
  • Your home will likely be sold if it there is more than £1,000 of equity. has a lot of
  • Vehicles over the cost of £1,000 will may be sold, however, if a friend or relative pays the difference then it is possible to keep.
  • Bankruptcy can affect your profession. You will be unable to work as a company director or be involved with the management of a limited company while you are bankrupt. It may also affect the ability to practice as a solicitor or accountant or in other financial services.
  • There’s a cost attached to bankruptcy which many people cannot afford.
  • It can affect a person’s ability to become a British Citizen and their status as a ‘person of independent means’

Frequently Asked Questions

Typically, bankruptcy lasts for 12 months from the date the court made you bankrupt; however, this can be extended if you don’t comply with the terms of your bankruptcy. Your circumstances may also require you to contribute monthly payments for up to two years after you are discharged.

If you fail to comply with the terms of a payment agreement, then a creditor can petition for bankruptcy. If you receive a call or letter informing you that a creditor intends to do this, you should seek professional advice straight away.

If you’re unable to repay your debts, you have the option of beginning bankruptcy proceedings. You can apply via an online application to an adjudicator

Although you will unlikely be able to maintain an existing bank account after bankruptcy there are many banks that will provide a basic account service which allows you to deposit and withdraw cash.

In some cases, if you have a joint account bankrupt and one of you as been declared bankrupt, the bank may insist on that account being closed and both of you opening a new account.

We've helped so many others just like you.