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Listed below are some of the frequently asked questions on Bankruptcy.
What is Bankruptcy?
Bankruptcy is a debt solution which enables you to start afresh. Bankruptcy is a legal process that enables you to pay off all your debts if you cannot meet repayments on all of your debts. Bankruptcy can also be started by someone else if you owe them more than £750.
A ‘Trustee in Bankruptcy’, (the person appointed to deal with your assets) sells your assets and distributes the proceeds to your creditors to recoup as much debt as possible.
After your bankruptcy ends your creditors can't make further claims against you for your debt. However, bankruptcy brings with it certain implications. For example, the fact you have been made bankrupt is advertised in the local press, your landlord is told and your employment may be at risk in some occupations and professions.
If I go bankrupt will I lose everything?
Once you become bankrupt all of your assets will automatically become the possession of your Trustee in Bankruptcy to sell without your consent. However, you will still be entitled to keep tools, books and vehicle(s) if they are considered essential for employment. In addition to this will also be allowed to keep clothing, bedding, furniture and household equipment needed to satisfy the basic domestic needs of yourself and your family.
The Trustee in Bankruptcy is allowed to take possession of the following assets:
- Any interest you may have in property, even if it’s held in joint names with a spouse or partner
- Any shares, bonds, endowments and savings policies
- Any funds held in bank or building society accounts
- High value assets such as motor vehicles and jewellery, although a suitable lower cost replacement can be provided instead
- Lump sums from private and occupational pensions if they mature during the bankruptcy. The Trustee may also be entitled to subsequent pension payments for up to three years.
Up to a maximum of three years from the date of bankruptcy you may have to pay money directly from your wages either voluntarily or via a Court Order. This is to ensure that any surplus income (or sell any asset if acquired during bankruptcy) is contributed towards the benefit of your creditors.
Will other people know I'm bankrupt?
All Bankruptcy Orders are advertised in the London Gazette as well as in your local newspaper. A bankruptcy register is kept by the Department of Trade and Industry as as well as the Insolvency Service. As this is a public document it can be seen by the public via the internet.
Anyone who you have had a financial relationship with will be told of your bankruptcy, including banks & building societies, mortgage and secured loan companies, hire purchase companies, your landlord, people you owe money to and pension and insurance companies.
What about my bank account?
All of your bank accounts will be closed and money in the accounts will be used to pay your creditors. Any joint bank accounts with a spouse or partner will result in half of the funds been taken to pay your creditors. With the authorisation of the Trustee you can open a new bank account.
Will my student loan be included in the bankruptcy?
If your student loan was taken out after 1st September 2004 then it cannot be included in the Petition for bankruptcy and not be written off. If you are currently making repayments directly through your wages then this will continue as normal until the student Loan is paid off fully.
Any student loans taken out before 1st September 2004 can be included as a creditor in your bankruptcy and your monthly payments to them should stop.
Will my job be safe if I file for bankruptcy?
Not always. There are some professions which will mean that filing for bankruptcy will mean losing your job or losing membership of a professional body.
If I go bankrupt will it affect my partner?
If you don't have joint debts (a mortgage is considered a joint debt), your partner will not be directly affected by your bankruptcy. If you have joint debts you are both joint and severally liable, so creditors will look to your partner to pay, in full, any debt that was included in your bankruptcy. Details of your bankruptcy will be held by the credit reference agencies and, because you reside together, this could have an adverse effect on your partner. He/she may also be affected by the action taken by the Trustee in respect of your interest in your home.
What advice should I get?
Always seek your own legal or financial advice about becoming bankrupt and the other options available to you. Official bodies like courts or the Insolvency Service won't help you decide on the best way forward. Debt Plan Direct will be happy to help you to review your own circumstances and advise on the best solution available to you.
What are the alternatives to bankruptcy?
If bankruptcy is not a suitable debt solution to resolve your debt problems the following options are also available:
How long does a bankruptcy last?
Generally you will be discharged from bankruptcy after a maximum period of twelve months. The duration of the bankruptcy can also be altered in the following circumstances:
- The court annuls the order on the grounds that all debts have been paid in full
- The court annuls the bankruptcy on the ground that the original order was not appropriate
- The discharge has been suspended as a result of failure to co-operate with the Official Receiver or Trustee. Only after the breach causing the suspension has been rectified will the twelve month period continue.
Remember: Even though you are discharged from bankruptcy the effects of the bankruptcy will be reflected on your credit file which will be affected for up to 6 years.
What can't I do when I am bankrupt?
The following list shows the restrictions applicable to bankrupts:
- If you apply for credit of £500 or more, you must inform the lender that you are an undischarged bankrupt.
- You can't conduct business directly or indirectly in any name other than that in which you were made bankrupt.
- You can't act as the director of a company or take part in its promotion, formation or management unless you get the court's permission to do so. (You can apply to the court for this.)
- You may not act as an insolvency practitioner.
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