Bankruptcy is a formal insolvency process available to individuals only. It is not a process used by Companies (despite the term being used widely for businesses also). For a summary of our company bankruptcy advice and services follow this link.
Anyone who has a debt of £750 or more can petition for their own Bankruptcy by filling out the necessary paperwork online and paying a fee (currently in the region of £680). However a creditor, or the court itself, can also petition for your Bankruptcy.
Bankruptcies are usually dealt with by the Official Receiver (a government official) unless you have assets to be realised to pay to your creditors in which case an independent Insolvency Practitioner is likely to be appointed to deal with you case as per a rota system.
Due to legal updates and changes, bankruptcies now last up to a maximum of 1 year (and not the 3 year period it was previously). This applies unless you are subject to a Bankruptcy Restriction Order or Undertaking to pay set funds into the bankruptcy estate for time exceeding that of the 1 year bankruptcy period.
What Happens to my assets and income when I am made Bankrupt?
In practice, a bankrupt is permitted to retain his tools of trade, a car of reasonable value, and items necessary to satisfy the basic domestic needs of the bankrupt and his family. High value cars will be sold and the bankrupt will receive part of these sale proceeds, to purchase a cheaper vehicle.
A bankrupt’s interest in any properties they may own becomes a bankruptcy asset, although the Trustee has a maximum of only three years to deal with this interest. A bankrupt’s spouse and dependent children may also have a right of occupation which prevents the Trustee from forcing an immediate sale of the family home.
Despite a typical Bankruptcy lasting only 12 months (until they are discharged from bankruptcy) the restrictions of bankruptcy are far-reaching and can be imposed for considerably longer if the Bankrupt has surplus income (extra income over and above the amount needed to pay bills) or high value assets.
Bankruptcy is a ‘last resort’ for many, particularly where there are property assets, but in the right circumstances it can provide a relatively quick solution to the burden of personal debt.
After discharge, all of the bankruptcy debts are written off, and the bankrupt can start again with a clean slate.
A bankruptcy will last on the bankrupt’s credit file for 6 years.
The Main Advantages of Bankruptcy are…
- Automatic discharge from Bankruptcy is usually within 1 year meaning it is a much quicker solution than an IVA.
- It is a relatively inexpensive solution to your debt problems.
The Main Disadvantages of Bankruptcy are…
- The Bankrupt loses control over his assets.
- The Bankrupt loses any professional qualifications they had.
- A Bankrupt can not act as a Director of a Limited Company for the duration of the Bankruptcy.
- The stigma of Bankruptcy, whilst improving, Is considered worse than the alternatives.
- If you are a sole trader, disabilities that apply to Bankruptcy make trading on difficult.
- Partnerships automatically dissolve.
- Credit problems due to a Bankruptcy being on your credit file for 6 years.
Bridge Newland Midlands, in Rugby, Warwickshire, are dedicated to offering a solution to all clients that seek our help and advice therefore if you think you may be Bankrupt and you need further Bankruptcy advice and services, at the cheapest rate, contact our enquiries team at firstname.lastname@example.org or call our office 0800 612 6197