Introduction:
Bankruptcy is an option that often has to be considered when an individual cannot pay their debts as they fall due. A first time bankrupt with debts will generally receive their discharge one year after the date of the bankruptcy order (there is the possibility that in some cases the bankruptcy discharge period will be less than one year).
Although bankruptcy has a bad stigma and is publicly advertised, it should always be considered when dealing with individual insolvency cases.
Please note that if your are ever faced with the prospect of bankruptcy you should look at alternatives as soon as possible such as the
Individual Voluntary Arrangement procedure (IVA).
Bankruptcy process:
A Court makes a bankruptcy order only after a bankruptcy petition has been presented. It is usually presented by:
- Yourself (Debtor's Petition); or
- Creditors who are owed at least £750 by you (Creditors' Petition)
A bankruptcy order can still be made even if you refuse to acknowledge or agree to the order. You should therefore try to co-operate fully once the bankruptcy proceedings have begun. If you dispute the creditors' claims you should try and reach a settlement with them before the bankruptcy order is made: trying to do so afterwards is difficult and expensive.
Advantages of Bankruptcy:
For the person involved, bankruptcy provides relative peace of mind and possible automatic discharge after one year (or less in some cases).
For the creditors, bankruptcy allows a full investigation of the debtor's affairs to be carried out.
Bankruptcy is a very serious matter. Declaring your self bankrupt can have disastrous long-term implications.
If you are declared bankrupt you can expect to: -
Have your situation advertised in the local press and the London Gazette for all to see.
Be required to fill in numerous forms and have an extended meeting with the Official Receiver, and, if appointed, a Trustee in Bankruptcy who will thoroughly investigate your affairs.
Have any business you own immediately closed and any employees dismissed.
Lose any assets of real value including your home, life insurance and possibly pensions
Lose any assets you may acquire during the term of your bankruptcy such as inheritances, insurance settlements, growth of asset value in your home.
Have your building society, creditors, landlord etc immediately informed.
Have all bank accounts, credit cards etc closed. Anything you might be leasing, or buying on hire purchase, such as your car will be immediately returned to the owner.
Lose professional and business status, have some employment opportunities prejudiced, face rejection from many associations and societies.
