What is personal bankruptcy?

What is personal bankruptcy?

Bankruptcy is a court led process that will be initiated by a creditor petition filed by a person or business that is owed money and is seeking to have a person declared bankrupt. In the UK only an individual can be declared bankrupt; corporate entities must be dealt with via liquidation or other corporate insolvency processes. If you have any questions and need help dealing with personal bankruptcy, or just want to talk about what can be done, Chamberlain & Co are happy to help. Call us on 0113 868 1203 to schedule your consultation today.

 

Alternatively you can declare yourself bankrupt. You must now use an online service with the government and fill in an online form to declare yourself bankrupt on the government website www.gov.uk/bankruptcy and there is no longer a need for a court hearing. Instead, your case will be heard by an adjudicator at the Insolvency Service in place of a judge. It becomes the adjudicator’s responsibility to review your application and make a final decision. Please note that to make yourself bankrupt you will need to pay, by cleared funds, a fee of £680 before the process is completed and you are declared bankrupt.

 

In the event that you are made bankrupt, Chamberlain & Co will be able to review your situation and advise on any other course of action you may have, such as an Individual Voluntary Arrangement (IVA), before making yourself bankrupt.

 

Once you are bankrupt, the Official Receiver (OR), a civil servant will handle your estate, and act as the Trustee of the bankruptcy estate. You will be required to attend a full interview and question session where you must disclose your assets and income. You will be asked to sign your statement and advised of the liability to an offence under the Perjury Act 1991. If you fail to truthfully answer all the questions asked by the OR, or if the OR concludes that your bankruptcy estate has sufficient assets to enable a distribution to your creditors, the task of dealing with the  estate and assets may be passed on to an external Insolvency Practitioner who becomes the Trustee in Bankruptcy.

 

When should you declare yourself Bankrupt?

 

Bankruptcy is a very serious declaration. You should only declare yourself bankrupt if you have debts you are unable to pay, you have no assets that can be realised to pay for your debts, you have no concern about maintaining control of your assets, your job will not be unduly affected by being declared bankrupt or you cannot make an IVA viable.

In most cases of bankruptcy, you will only be subjected to 12 months of restrictions as an un-discharged bankrupt.

Your pension is a protected asset and cannot be touched by creditors.

 

If you are found to have surplus income each month, the OR / your Trustee are likely to ask that you to agree to an Income Payments Agreement where you make contributions to the bankruptcy estate for the benefits of your creditors which is payable for up to three years. If you refuse, an Income Payments Order can be sought via the Court by your Trustee or the OR for contributions for a similar period.

 

By comparison in order to secure your creditors’ agreement to an IVA, you will most likely need to offer a contributions-based IVA for a period of up to five years and re-mortgage any property you may own to release any equitable interest you may have during the IVA period.

 

Please be advised that bankruptcy can have the following implications:

  • Bankruptcy does not prevent any secured creditor from taking steps to enforce their security – you could lose your house.
  • All of your bank accounts will be frozen during your financial affairs investigation.
  • You must pay a fee via uk to process your application – You are not bankrupt until this is completed.
  • You must cooperate with requests of the Official Receiver or your Trustee in Bankruptcy or your bankruptcy period may be extended.
  • All assets within your estate vest with either the Official Receiver or Trustee. It is unlikely you will retain control.
  • Trading while bankrupt is difficult. You will have to disclose the trading name under which you were made bankrupt. It will be very difficult to obtain credit.
  • If you are director of a limited company, you will have to resign.
  • Depending on your occupation you may also lose your job.
  • Your credit rating will be affected for several years.
  • The London Gazette and the individual insolvency Register website will advertise your bankruptcy publicly.

 

Is bankruptcy right for me?

 

If you are under increasing pressure from creditors, have received a bankruptcy petition or are unsure if you should declare yourself bankrupt, then contact one of our insolvency team for a fully confidential discussion about your personal situation. We are here for you: Chamberlain & Co have offices in Leeds, London, Sheffield and York. Call us on 0113 868 1203 to schedule your consultation today.

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