Bankruptcy

Bankruptcy is a formal insolvency procedure used to deal with the affairs of individuals who have been legally declared to have liabilities which exceed their assets or to be unable to pay the debts. This legal declaration ("bankruptcy order") is made by the courts and can be obtained by any creditor owed over £750 or by the individual concerned, applying to court.

If a bankruptcy order is made against you, your affairs will be dealt with by a trustee in bankruptcy and, subject to certain exemptions, all of your assets will be sold to pay your creditors, as far as possible. Assets which you should be allowed to retain include:

Furniture, bedding, clothing and household equipment for basic domestic needs
Items you require to continue a trade
A modest car or van
Money in a pension fund

The trustee would, therefore, seek to sell your home or at least realise your interest in it, provided its value was in excess of any mortgages on the property. He would also seek to realise any shares, investments, antiques and bank or building society accounts.

Unless you have previously been bankrupt, your bankruptcy will usually last no more than 12 months but you will be subject to a number of restrictions during this time. Your trustee will also advertise details of your bankruptcy in a local paper and inform a variety of interested parties of your bankruptcy.

Any assets you receive whilst bankrupt, such as a lottery win or inheritance, will be used to pay your creditors and, if you have any surplus income, you will be expected to make payments to your creditors for up to 3 years from the date of the bankruptcy order.

Bankruptcy does nevertheless offer the opportunity of a fresh start as, in most cases, it prevents your creditors making any further claims against you.

Call us on 0800 195 4585 if you are considering bankruptcy, as there may be some alternative solutions to your problem