Bankruptcy
Anyone who lives in the UK and owes more than £750 can use the bankruptcy process to become debt free.
In the UK, the definition of 'Bankrupt' is "an insolvent person" or "a person unable to repay their debts."
There are principally two ways in which you can become subject to a Bankrupt Order, you can either be made bankrupt by one of your creditors or you can declare yourself bankrupt, the main difference being who pays for the bankruptcy fees.
The bankruptcy fees come in two main parts, there are court fees of £150 which may be waived under some circumstances - such as unemployment, and the Official Receiver's deposit which is £450.
These charges must be paid by the person petitioning for the Bankrupt Order.
Bankruptcy is not a punishment. Bankruptcy is, more accurately, a legal process designed to provide the court and her representatives the necessary structure needed to deal with a persons inability to repay their debts.
In essence, the control over repaying your debt is removed from you as a bankrupt and, instead, passed to a court representative called the Official Receiver.
His task is to ensure that your current belongings, or 'estate', is valued and when necessary liquidated, and your future earnings capability is assessed, in order to ensure you repay as much of your debt as possible.
If, through the course of his investigations, the Official Receiver believes you can afford to make monthly repayments to your debts, he can impose an Income Payment Order (IPO), and if necessary he can deduct this payment directly from your income via an Attachment of Earnings Order if you fail to comply.
A bankruptcy Order will normally last for 12 months, after which you will become discharged and your outstanding balances will be written-off. However, payments into an IPO normally last up to 3 years from the date the Order began.
In cases where the Official Receiver believes there to be good reason, such as fraudulent activities, gambling debts or just irresponsible spending, the restrictions placed on you as a bankrupt through your Bankruptcy Order, can be extended for upto 15 years. This can be done through a Bankruptcy Restriction Order (BRO).
Whilst you are subject of a Bankruptcy Order, you are cannot apply for any credit greater than £500 without notifying the potential lender that you are an undischarged bankrupt.
Other points to be aware of include.:
- You will have to attend your bankruptcy hearing at court.
- Your name will be published in the local press.
- Certain professions will restrict Bankruptcy as a solution.
- Bankruptcy will have a severe impact on your ability to obtain credit.
- Your name will be placed on the public record, the Insolvency Register.
Whilst these points are not in themselves reasons to avoid declaring yourself bankrupt, for many they add to the overall perceived stigma that bankruptcy carries.
And whilst Bankruptcy is undoubted needed as a debt solution, for many people it is viewed as too punitive for their personal situation.
Many people do find the opportunity of reaching an amicable settlement with their creditors through an IVA, which allows them to repay their creditors as much as possible at an affordable rate for a fixed term, as much more appropriate.
So if you would like to discuss your circumstances with an IVA expert, just call our helpline on 0800 856 0569 now. All our advisers have the ability to explain more clearly the differences between Bankruptcy and an IVA and how each would differ when applied to your personal circumstances.
