Bankruptcy

Bankruptcy is a legal status that usually lasts for a period of one year and can be referred to as Self Employed Debt. It can be used as a way of clearing your debts if you do not have any means to do so otherwise. When you are declared bankrupt any non essential assets and excess income are used to pay back companies you owe money to such as loan providers or credit card companies. At the end of the bankruptcy period your debts will usually have been wiped. You are normally finished with the bankruptcy after a 12 month period.

A court can declare someone bankrupt once a bankruptcy petition has been presented; once this has happened the court can then issue a Bankruptcy Order. A bankruptcy petition can be filed in two different ways:

• By You – you can download a debtor’s petition from The Insolvency Service website. Once the petition is completed you must then make an appointment with your nearest County Court to take the petition in to be filed. The fee for filing the petition is £175 (this may be waived if you meet certain criteria) you must also pay a fee of £525 to the Official Receiver for the work involved.

• By a creditor - A creditor can issue a creditor’s petition if you owe them an unsecured debt or more than £750.

Bankruptcy is organised by either an Official Receiver or an Insolvency Practitioner depending on your circumstances.

• The Official Receiver will act to protect your assets or as Trustee in Bankruptcy if you have no assets.

• An Insolvency Practitioner will act for you if you do have assets and will sell them in order to pay back your creditors.

Once you have been declared bankrupt you will no longer have any control over your assets as they will be auctioned to pay off your debts. However there are some items that do not count as assets, these include items you need for work and household belongings needed by you and your family.

Once you are declared bankrupt there are certain rules you must follow:

• You must provide all your financial details to the Official Receiver

• You must hand over all the required assets and any relevant paperwork such as bank statements etc…

• You must inform the Insolvency Practitioner or the Official Receiver of any more assets acquired by you during the bankruptcy

• You must not use your bank or building society account or credit cards

• You must not obtain credit of more than £500 without informing the creditor of your bankruptcy status

• You must not make payments directly to your creditors

• If you own your own property it may have to be sold and the proceeds put towards paying off your debts.

• If you are self employed and own your own business it will usually be closed

• You could have to explain to a court how you ended up in so much debt.