the right solution for you?
If you are deep in debt with no clear way of getting out, then declaring bankruptcy could be the right solution for you.
If we think bankruptcy is the best way out of your debt problems, then we'll provide bankruptcy information .and refer you to an organisation who can assist you.
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Is bankruptcy right for me?
By declaring bankruptcy, you are declaring that you do not have the means to pay off the any debts you currently owe. You will no longer be responsible to your creditors and generally, even after the bankruptcy period ends, your debt will be written off.
So declaring bankruptcy alleviates pressure and gives you the chance for a fresh start after a certain period of time, but also comes with its downsides. Namely, any luxury assets you own, such as a car or even your house, can and most likely will be seized and sold to help pay off your outstanding debts and any business you own will be shut down.
As such, it is worth considering other debt solutions before declaring bankruptcy, and thankfully, here at Money Expert, we can advise you on any of the solutions available to you, including:
Bankruptcy advice through Money Expert
Here at Money Expert we offer advise on a wide range of debt solutions such as bankruptcy. We'll help you decide if bankruptcy is the right solution for you and if it is then we'll tell you what you need to do.
Pros and cons of Bankruptcy
Bankruptcy When you want to start afresh
- Most Debt is written off and you gain a degree of freedom and a certain peace of mind
- Most cases are automatically discharged from bankruptcy after one yea
- You are allowed to keep basic possessions and the tools of your trade if you are self employed
- Your bankruptcy is entered on a public register and is advertised
- You will remain liable to pay certain debts in particular student loans, fines and some debts arising from family proceedings
- Certain professionals are barred from practicing if they are made bankrupt
- If you apply to the court for your own bankruptcy, you will have to pay a court fee
The Bankruptcy Process
How Bankruptcy Works
There are two ways of becoming bankrupt, either:
- You can declare bankruptcy yourself, or
- If you are indebted to a creditor to the value of £750 or more, then that creditor can apply to have you made bankrupt.
Once you have been declared bankrupt, an Official Receiver will become responsible to the creditors you owe money to and will take control of both your money and your property. Your details will be published in the local press will also on a bankruptcy register called the Individual Insolvency Register, which is publicly accessible.
Some of your possessions may (and likely will) end up being used to pay off outstanding debts, including any luxury assets such as your car.
You will be subject to various restrictions while the bankruptcy order is in place (this is often only for one year) and often you will not be able to work during this period, depending on your company's policy.
Once the bankruptcy order has been lifted, your debts will generally be written off, allowing you to make a fresh start.
Personal Bankruptcy Costs
It will cost you up to £700 to declare personal bankruptcy;
- £525 for managing your bankruptcy, and
- £275 in court costs. Note that you might not need to pay this fee if you are on income support.
This, combined with the probable seizure of your assets mean that going bankrupt is not simple a way of escaping your debt once and for all. Compare different debt solutions with Money Expert to find out which is best for you.
3. Restrictions during bankruptcy
While the bankruptcy order is in place, you will be subject to certain restrictions which generally involve making anyone you conduct any business with aware that you are bankrupt. During the order, you will not be able to:
- Direct a company
- Borrow anything over £500 without informing the lender of your bankruptcy
- Manage a business without informing anyone you do business with of your bankruptcy.
These restrictions will last until the bankruptcy order is over, and can be extended as a result of poor or dishonest conduct on your part during or leading up to the declaration of bankruptcy.
Bankruptcy application process
To apply for bankruptcy you will need to first petition the court, stating your intentions. This involves providing the court with certain forms which can be found here.
Once your bankruptcy petition has been received, the court will decide if they should allow you to become bankrupt, and if so, a bankruptcy order will be issued against you.
The best way to prevent bankruptcy is to practise general good money management. Avoid getting in large amounts of debt where possible, and avoid credit cards with high interest rates.
By comparing various financial products such as loans and cards with Money Expert, you can make sure that you maintain a steady financial standing and avoid bankruptcy. We also have guides on, for example, investing your money in ISAs to stretch it that much further and prevent having to declare bankruptcy.
Bankruptcy and your house
Once you have been declared bankrupt, there is a high risk of losing your house (amongst other possessions) in order to pay off your outstanding debt. Only if your other assets, luxury or otherwise, have been seized and sold and not enough money has been to pay off the debt, will your house be taken.
All of this will be handled by a trustee, someone appointed to manage your bankruptcy. This will either be an Official Receiver (a court official) or an insolvency practitioner (an authorised debt specialist).
Voluntary bankruptcy is when you declare yourself bankrupt by petitioning the court. This can be done if you find yourself in a position such that you either have no way of paying off any debt you owe, or if you have so little that it would take years to pay it off. The court will decide if it is appropriate for you to be declared bankrupt.
Creditor Instigated Bankruptcy
Alternatively, any creditor to whom you owe £750 or more can apply to have you declared bankrupt. This can happen whether you wish it to or not, so it is advisable to ensure all of your current debt is manageable.
Before the situation gets out of control browse Money Expert's guides for the options available to help you proactively manage your debt.
The Bankruptcy Period
If it is your first time being declared bankrupt, then the bankruptcy order will generally last for one year. This will be extended if you conduct yourself poorly/dishonestly (e.g. hiding assets) during this period, or if you break your bankruptcy restrictions.
Frequently Asked Questions
How long will bankruptcy last for?
Bankruptcy will generally last for only one year if it is your first time. Otherwise, or if you flout any of the conditions of your bankruptcy, it will be extended.
Can I apply for loans during bankruptcy?
You can apply for loans while you are bankrupt, but if the loan you are applying for is over £500, then you will be required by law to inform the lender of your bankruptcy.
Will my debts be written off during bankruptcy?
Your debts will be paid off by your trustee by seizing and selling your assets, and will generally be written off on termination of your bankruptcy order. Any creditor must go through a lengthy court procedure in order to attempt to re-open any debt that has been neutralized because of bankruptcy.
What is a bankruptcy petition?
A bankruptcy petition is what you must provide the court with if you wish to voluntarily declare yourself personally bankrupt. The court will hear your petition, and on examining your circumstances will decide whether or not to declare you officially bankrupt.
What is a bankruptcy order?
A bankruptcy order is what is taken out against you by the court in order to declare you bankrupt. The order will generally last for one year only.
Will I lose my house by becoming bankrupt?
It is not guaranteed that you will lose your house, but depending on the size of your debt it may be likely. Your trustee is within their rights to seize and sell your house if they deem is necessary.
What court fees will I need to pay in the UK?
Providing you are not on any income support, you will be required to pay court fees of £275 in order to declare bankruptcy.
What is a bankruptcy restrictions order?
A Bankruptcy Restrictions Order (BRO) is made by the court against someone who has been made bankrupt as a result of any dishonesty or misconduct on their part related to the bankruptcy.
A BRO extends the period of time for which the usual bankruptcy restrictions apply to between 2 and 15 years.
When will I be discharged from bankruptcy?
Provided you conduct yourself properly and do not break any of the bankruptcy restrictions in place, you will generally be discharged from bankruptcy after one year.
How will bankruptcy affect my mortgage?
If you already have a mortgage and are declared bankrupt then one of two things will happen, either:
- Your home will be foreclosed and used to pay off any outstanding debt including your mortgage, and you may be unable to keep your house after having been discharged from bankruptcy. Or,
- You may be able to set up a structured debt repayment plan, protecting your house from foreclosure on the condition that you keep up with this new plan and repay everything usually within 5 years.
Will I appear on the insolvency register?
Once you are declared bankrupt, your details will be published on the Insolvency Register and will remain there until three months after your discharge from bankruptcy.
Where can I file for bankruptcy?
Once you have prepared all the necessary documents you will need to attend court in person so give your petition. You cannot currently apply for bankruptcy online.
How long will bankruptcy affect my credit profile for?
Evidence of you bankruptcy will remain on your credit profile for six years after the order has ended and so your ability to take out a loan or any form of credit will be diminished as a result.In such a situation, you may want to consider taking out a bad credit/credit building card or loan. For more on these options, see these articles. [link to bad credit cards and bad credit loans articles]
What is a bankruptcy trustee?
A bankruptcy trustee is someone who is designated as responsible for managing your bankruptcy. This includes managing which of your possessions and assets to sell in order to pay off outstanding debts. The trustee can be either an Official Receiver or an insolvency practitioner.
What is an insolvency practitioner?
An insolvency practitioner is an authorised debt specialist who may be assigned to your bankruptcy case, working as a trustee. Alternatively, an Official Receiver could be appointed by the court to your case.
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Debt Advice News
8 Sep 2015
The amount of homes across the UK that are now dealing with problem debt has gone up by 25% since 2012 up to the end of 2014.
31 Jul 2015
According to the Insolvency Service, the number of people declaring insolvency in England and Wales had reached its lowest level in the last 10 years.
30 Jan 2015
The amount of people being declared as insolvent within Wales and England has dropped to the lowest it has been since the year 2005.
16 Jan 2015
Anyone striving to cope with their debts can welcome the news that the minimum bankruptcy threshold is being raised from £750 to £5000, as the government seeks to reserve insolvency orders for individuals with greater amounts of debt.