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When you are made bankrupt, all your debts will be addressed (with some exceptions such as student loans and matrimonial liabilities). However, bankruptcy should be viewed as your last resort.

Key things to know about bankruptcy

  • Bankruptcy usually lasts for a year, but you may have to make contributions to your Trustee in bankruptcy for three years.
  • At the end of the bankruptcy period, most debts are cancelled but restrictions remain on obtaining credit in the future and working in certain professions.
  • An Official Receiver is appointed to analyse your assets and investigate the cause of your bankruptcy.

Bankruptcy - what you need to know

If you are in serious debt, bankruptcy protects you from the people you owe money to and allows you to start afresh. However, bankruptcy is a serious matter with significant consequences and should only be considered as a last resort.

In bankruptcy, a Trustee is appointed by the court to take control of any assets you have which the Trustee considers to be non-essential. These assets will then be sold off and the money raised is used towards paying the people and/or bodies you owe money to. You will be entitled to keep your reasonable household items and a modest vehicle if you can show the need. Examples of non-essential assets which the Trustee may sell include expensive jewellery and cars or shares and investments. If there is equity in your home it is highly likely that this will be realised. Unless you can raise money from sources such as family or friends, your property is likely to be sold.

Bankruptcy also imposes restrictions including removal of credit facilities, freezing of bank accounts and, for certain professions, you could run the risk of criticism or even losing your job.

On credit applications, lenders often ask for details of any previous bankruptcies, therefore after your period of bankruptcy ends you will also find it difficult to get credit or a mortgage. Some employers also take credit checks which may harm future employment prospects.

If you are a married couple and you are both applying for bankruptcy, you will each have to pay separate fees.

How do I go bankrupt?

Declaring yourself bankrupt is a serious and difficult decision to make, but can offer an opportunity to those overwhelmed by debt a chance to recover and enjoy a fresh financial start.

How do you decide if bankruptcy is for you?

If you believe that bankruptcy is a route that you need to take, you should arrange a meeting with either the Citizen Advice Bureau, a solicitor, an authorised insolvency practitioner or a qualified accountant who can advise you on how to declare yourself bankrupt.

Filing for bankruptcy is an option that needs to be considered carefully, as once proceedings begin you will be placed under certain restrictions and will be required to surrender any possessions of value. There may be alternatives to bankruptcy available – Help with Debt Consolidation can arrange for you to speak with our expert partners to ensure that you are taking the most suitable route for your financial needs.

Where do you start when filing for bankruptcy?

To begin bankruptcy proceedings for yourself, you will need to present a debtors petition and statement of affairs to a court, which will then be processed to create a bankruptcy order. If you live in the London Insolvency District and owe £100,000 or more, your case will be heard at the London High Court, or at the Central London County Court if you owe less. If you live or trade outside of this area, your case will be referred to the County Court in the area that you have lived or traded for the longest in the past six months.

How much will it cost for you to declare yourself bankrupt?

You will be required to pay a court fee of £175 which can be waived in certain cases, for example if you receive Income Support. Following this, there is a deposit of £525 which will contribute towards the costs of administrating your bankruptcy. This is a mandatory fee applicable in all cases.

What happens when the bankruptcy order is processed?

When the bankruptcy order has been made, details of the order will be published in the legal notices of the London Gazette. You will also be assigned an official receiver who is a civil servant of the court and is responsible for administering your bankruptcy. You will then report with all necessary information to your official receiver and may also be required to attend an interview.

How long will bankruptcy last for?

A period of bankruptcy usually lasts no longer than 12 months before you are discharged, unless extenuating circumstances lead to a suspension. You will be automatically free from bankruptcy if the court decides to cancel your order, and this can occur if either the order was raised incorrectly, or if the owed funds are paid in full.

Implications of bankruptcy

  • If you have surplus assets they may be sold for the benefit of your creditors.
  • You are allowed to retain basic living essentials such as furniture and clothing. But if you have equity in your home you are likely to have to sell it.
  • If you have an expensive car you will be asked to sell it and manage with a cheaper model.
  • Any valuable furniture, jewellery or policies are also likely to be sold.
  • It can be hard to get financial services in the future such as credit or a mortgage.
  • Your bank accounts and credit cards are closed.
  • Your bankruptcy may be announced in the local newspapers.
  • You may face restrictions on your employment in the future.

For more information regarding Bankruptcy, call us now on 0808 163 9579 to speak to an advisor or complete the form below.

Complete this form and we'll find the right option for you

Call us on our freephone number 0808 163 9579

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