You May Lose Your Home
To pay off a large portion of your debts, you may be required to sell your property to release any equity. This will mean that you will lose your home, so its important to find alternative housing as soon as possible whether that means staying with a friend or relative or speaking to your local authority about re-homing schemes.
Make Sure Bankruptcy Is The Right Option For You
Bankruptcy can offer you a fresh start if you can’t see any other way out of your debt problems. However, going bankrupt may have a serious impact on your day-to-day life, so it isn’t for everyone. Make sure you’ve done your research, taken advice and are sure it’s the best option for you.
What Happens To Your Business
If youre self-employed, your business will be closed. Any business assets will be claimed by the trustee.
Your employees may make a claim for unpaid wages and holiday pay, payment in place of notice, and redundancy. Theyll make this claim to the National Insurance Fund, or the money may be claimed in the bankruptcy process.
You can start trading again, but youll have to follow certain rules.
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What Happens When Declaring Bankruptcy
If you’re struggling financially, bankruptcy gives you the opportunity to pay down a portion of your debts over time or have some of them eliminated entirely.
Either way, declaring bankruptcy grants what’s called an automatic stay, which is essentially a block on your debt to keep creditors from trying to collect. They can’t deduct money from your bank account, garnish your wages or go after any of your other assets.
You’ll then have time to work with the court and your creditors to determine the next steps.
Pros Of Declaring Bankruptcy
So what are the benefits of an individual declaring bankruptcy? Bankruptcy is often seen as being a fresh start, because in many cases individuals are freed of their major debts. Creditors cant legally chase payments, and once the bankruptcy period is over youre free to start afresh.
Lets take a look at the pros of declaring bankruptcy in more detail.
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What Happens After I Go Bankrupt
After you go bankrupt, an Official Receiver will be appointed within two weeks of receiving your bankruptcy order.
They will assess your:
In order to decide how they can be used to meet your debts.
You might also be asked to attend an interview with the official receiver.
Your creditors have to make a formal claim to the trustee for the money they are owed.
You cant make direct payments to them and they cant ask you for payments.
After a period of time , most of your outstanding debts are written off and you can make a fresh start.
Until you are discharged from bankruptcy you will remain under bankruptcy restrictions.
For example, you wont be able to apply for credit of £500 or more without telling the lender about the bankruptcy.
You can check your discharge date online using the Individual Insolvency Register on the GOV.UK website
Any credit you do get is likely to be expensive both now and in the future.
Bankruptcy affects your credit rating and credit reference agencies will keep your details on file for a minimum of six years.
Immediately After Bankruptcy Has Been Approved
The bankruptcy order will then be set up and your bank accounts may be frozen because the Official Receiver takes control of it, while reviewing your finances.
Its a good idea to withdraw enough money, so that you can pay for anything you need while this process is being carried out such as groceries, fuel and household bills.
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How Your Creditors Are Paid
The official receiver will take control of your assets unless an insolvency practitioner is appointed. An insolvency practitioner is usually an accountant or solicitor.
The person who takes control of your assets is known as the trustee. The law says you must cooperate fully with them.
The trustee will sell your assets and tell the creditors how the money will be shared. Creditors must then make a formal claim. You cant make payments directly.
If you have assets, money from the sale of these will be used to pay the costs of the bankruptcy process before creditors are paid. If your case is administered by the official receiver the following fees will all be deducted from the money realised:
- an administration fee of £1,990 if you applied for your own bankruptcy or £2,775 if someone else applied
- a general fee of £6,000
- 15% of the total value of assets realised
- a fee charged at an hourly rate where money is paid to creditors
If there are insufficient assets in your case the official receiver will still process your bankruptcy.
Next, money will be used for:
- certain debts in relation to employees, if you had any
- your other creditors
- interest on all debts
Any money left over will be returned to you. If everyone is paid in full you can apply to have your bankruptcy cancelled .
Will A Bankruptcy Write Off A Student Loan
A student loan taken before 1st September 2004 might be included in a bankruptcy. Take advice from your Trustee in this respect. The Student Loan Company should be listed as a creditor and the individual should stop making monthly payments to this company upon the instruction of their Trustee.
If the loan was taken out after this date, it may not be written off through bankruptcy. If payments are being deducted from salary and the individual goes bankrupt, these deductions will continue until the student loan is repaid. Individuals who earn less than the income threshold for student loans will not be required to make payments until their salary reaches the designated level. However, interest will still accrue according to the agreement entered with the Student Loan Company.
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When To Consider Bankruptcy
If you are a homeowner, bankruptcy could put your property at risk because if you have enough equity in it, the property can be sold and funds used to repay your debts. There are potentially other options like Individual Voluntary Arrangements or Debt Relief Orders that may be better.
Talk to a debt advisor from Citizens Advice or from a debt charity like StepChange to see if there are better options for you.
Assistance With Declaring Bankruptcy
If you need help deciding whether Bankruptcy is the right option for you, there are a number of free, impartial debt charities that you can speak to such as National Debtline and Debt Advice Foundation. If youre sure Bankruptcy is the right option for you and you need help completing the forms then theres no need to pay any fees. Your local CAB, local County Court, and the Insolvency Service can all answer any technical questions you have.
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Bankruptcy: What Happens When You Go Bankrupt
Its affected 50 Cent, Fazer from N-Dubz, Kerry Katona and pretty much all of the band Blue among a lot of other celebrities.
But when we talk about bankruptcy, how many of us actually understand what it means?
Katie Price is the latest celeb to be declared bankrupt after failing to stick to a plan to repay her debts.
And after reading this, youll know exactly what that means.
Alternatives To Personal Bankruptcy
Bankruptcy offers no protection to personal assets, meaning you could lose assets like your home and car. There are other options to help repay your debts, which may, in some instances, help protect your assets. In some cases, you may be able to restructure your borrowing, or if you are a homeowner, possibly re-mortgage.
- Formal repayment arrangementsAn Individual Voluntary Arrangement could be another solution. An IVA is a procedure that allows you to group all your unsecured debt, making affordable monthly repayments over a period of up to 5 years. Any unsecured debt remaining at the end of the arrangement is written off.An IVA can only be arranged through a licensed insolvency practitioner. Contact us now for more information and find out if this arrangement would suit your circumstances.More on personal and sole trader debt
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Apply For A Basic Bank Account
A basic bank account is exactly what it sounds like. You wont get a cheque book or overdraft facility, but you will be able to get wages, benefits, pensions, etc. paid into it.
You can also withdraw cash from Post Offices and cash machines and set up direct debits and standing orders, as well as pay money in, withdraw money and check your bank balance at the bank counter.
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Contact Irwin Insolvency Today For Your Free Consultation
With decades of experience offering businesses and individuals across the UK advice on insolvency and bankruptcy, our licensed insolvency practitioners offer impartial expertise that can help you through tough financial times.
If youre weighing up the pros and cons of declaring personal bankruptcy, dont hesitate to contact Irwin Insolvency for your free, no-obligation consultation.
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How To File For Bankruptcy
Filing for bankruptcy is a legal process that either reduces, restructures or eliminates your debts. Whether you get that opportunity is up to the bankruptcy court. You can file for bankruptcy on your own, or you can find a bankruptcy lawyer, which most experts regard as the prudent avenue to pursue.
Bankruptcy costs include attorney fees and filing fees. If you file on your own, you will still be responsible for filing fees. If you cant afford to hire an attorney, you may have options for free legal services. If you need help finding a lawyer or locating free legal services, check with the American Bar Association for resources and information.
Before you file, you must educate yourself on what happens when you file for bankruptcy. Its not simply a matter of telling a judge Im broke! and throwing yourself at the mercy of the court. There is a process a sometimes confusing, sometimes complicated process that individuals and businesses must follow.
The steps are:
Bankruptcy Pros And Cons
Just like the rest of the debt solutions, declaring bankruptcy has its own pros and cons. Weighing out its benefits against costs can help you determine whether it is the right option for you.
Advantages of Bankruptcy: Depending on your financial situation and amount of debt, declaring bankruptcy can be a blessing for you. Here are some of the advantages of going bankrupt:
Waived Debts: Going bankrupt will reduce your debt load since all the unsecured loans you have defaulted on can usually be written off.
Protection Against Legal Action Once you secure a bankruptcy order, your insolvency is formally acknowledged. This offers a measure of protection against creditors since they can no longer take any legal action against you to recover the money you owe.
No Additional ChargesDeclaring bankruptcy will also stop any additional fees and penalties. This means that your creditors cannot apply further charges and interest payments on you.
Reduced PressureAfter you declare bankruptcy, you will not have to maintain contact with your creditors, and you will stop hearing from them.
Disadvantages of BankruptcyThe decision to declare bankruptcy should be well-thought-out because it can have serious implications on your life. Here are some of the risks associated with going bankrupt:
Asset LiquidationAssets such as your home or car might have to be liquidated and sold off in order to pay your creditors.
You could write Off Your Unaffordable Debt
You could avoid bankruptcy
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Problems With Your Bankruptcy Trustee
It may be that your creditors are coming to you because they havent heard anything from the official receiver or bankruptcy trustee. Since this is part of their job, if they are failing to act you can make a complaint.
If your trustee is the official receiver, you should use the Insolvency Services complaints procedure here. If they are an insolvency practitioner, youll need to go through their professional body using the Insolvency Service Complaints Gateway.
Bankruptcy Order And Official Discharge
Applying for bankruptcy can be a daunting prospect, but being issued with a bankruptcy order may be seen as the first day of a new beginning.
A bankruptcy order will mean that unless creditors have court permission to do so, they will not be able to take legal action against you to recover the outstanding debts owed to them at the date of the bankruptcy order itself Insolvency Act 1986).
As such, it is not unusual for debtors to feel a sense of relief once the bankruptcy order has been issued, and it can often feel like the first step to getting your life and finances back on the straight and narrow.
You wont be discharged from the bankruptcy until twelve months later, when you will be released from most of the debts owed when you were declared bankrupt .
Whether you have made no payments to creditors, still have some assets yet to be sold or are on an Income Payments Agreement , you will still be discharged automatically after one year.
However, if the trustee has reason to believe you have entered into the bankruptcy fraudulently, or if you have not fully cooperated with them, then your bankruptcy may be suspended indefinitely and extended longer than twelve months.
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What Happens After You Are Discharged From Bankruptcy
The day you’re discharged from bankruptcy is a new start, all the debts you took into bankruptcy will be gone and you’re free to start afresh, but what happens next? Here’s how to start getting your finances back on track.
Once you’ve been discharged you’ll no longer be bound by the restrictions of your bankruptcy order, but unfortunately, that’s doesn’t mean all your finances will go back to normal straight away.
When Should I Declare Bankruptcy
When asking yourself Should I file for bankruptcy? think hard about whether you could realistically pay off your debts in less than five years. If the answer is no, it might be time to declare bankruptcy.
The thinking behind this is that the bankruptcy code was set up to give people a second chance, not to punish them forever. If some combination of bad luck and bad choices has devastated you financially, and you dont see that changing in the next five years, bankruptcy is your way out.
Even if you dont qualify for bankruptcy, there is still hope for debt relief. Possible alternatives include a debt management program, a debt consolidation loan or debt settlement. Each one of those choices typically require 3-5 years to reach a resolution, and none of them guarantees all your debts will be settled when you finish.
Remember that bankruptcy carries significant long-term penalties. It is stuck on your credit report for 7-10 years, which can make getting loans in the future very difficult.
The flip side of that is there is a great mental and emotional lift when all your debts are eliminated, and youre given a fresh start.
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What Happens To Your Assets After Discharge
Assets that are part of the bankruptcy stay under the trustees control when your bankruptcy ends. It can take time for all assets to be dealt with.
You must keep making any payments agreed under an IPA or IPO.
Your family home
If your family home has not been dealt with 3 years after the bankruptcy order, the interest may be given back to you.
If the interest in your family home is returned to you, the Land Registry will be told that the property is no longer part of your bankruptcy estate. The trustee will send notice to the Land Registry and the restrictions will be removed.
Your business
The restrictions on your business end when bankruptcy ends, unless the official receiver feels youve been dishonest. They can then apply to extend the restrictions
Placing A Discharge Of Bankruptcy Notice In The Gazette
Should you be discharged from bankruptcy, a notice can be placed in The Gazette:
- Discharge of insolvency notices – If you want to request that the Official Receiver places a discharge of insolvency notice in The Gazette, point 9 in the Insolvency Services guidance on bankruptcy sets out the process you must follow.
- Notice of annulment – If your bankruptcy is annulled you can also request that the Official Receiver places a notice of annulment in The Gazette point 9 in the Insolvency Services guidance on bankruptcy sets out the process you must follow.
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Why Would A Company Need Liquidating
A company is classed as insolvent when it can no longer pay its debts when they fall due, or the value of liabilities and debts exceed the assets total value. Directors have a legal obligation not to continue trading when a company is insolvent, and they must act in the creditors best interests to avoid their position further deteriorating.
If your insolvent companys debts are so burdensome that recovery and repayment arent an option, you can choose to close the company by putting it into a . Doing so writes off all the companys unaffordable unsecured debts and allows the directors to move on or start again afterwards.
Its illegal to attempt to strike off an insolvent company, so to start a liquidation, you should contact us before your creditors take further action.
Bankruptcy Normally Lasts For 3 Years And 1 Day From The Day We Accept Your Bankruptcy Form
Your bankruptcy period starts from the day we accept your bankruptcy application. If a creditor makes you bankrupt, the bankruptcy period starts from the date you file a statement of affairs that we accept. In some cases, your trustee can lodge an objection to extend the bankruptcy for up to eight years.
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