Bankruptcy
Bankruptcy is often considered the last resort for people struggling with debt because there are other free debt solutions to consider first. We will give you free, immediate and professional debt advice to find the best debt solution for you.
What is bankruptcy?
Simply put, bankruptcy can occur when an individual's debts are greater than his or her assets. Declaring bankruptcy means an individual is financially insolvent and can be relieved of outstanding debts. It is often considered as a last resort for people with serious and ongoing debt problems.
Find out about Payplan's alternatives to bankruptcy.
Key things you should know about bankruptcy
- Bankruptcy usually lasts for a year.
- At the end of the bankruptcy period, most debts are 'discharged' (cancelled) but there are restrictions on obtaining credit and working in certain professions.
- An Official Receiver is appointed to protect your assets and investigate the cause of your bankruptcy.
How will bankruptcy affect me?
- If you are declared bankrupt, you are no longer liable for any outstanding debts documented in the bankruptcy proceedings. This can give you peace of mind and alleviate stress.
- Your assets will be shared out between creditors and you can make a "fresh start". However, it doesn't come without implications. Read on.
What are the disadvantages of bankruptcy?
- The Official Receiver can sell any of your assets: this includes your family home, your car and any of your household effects (if they are deemed to be of excessive value).
- You will be obliged to declare you are an undischarged bankrupt if you apply for credit in excess of £500.
- You are excluded from occupations and professions, such as the Police Force, Armed Forces, Local Council and Government Offices. Many employers carry out background searches - this might mean that promotion prospects are affected.
- You will be unable to act as the director of a company.
- You cannot take any part in the promotion, formation or management of a limited company without the permission of the court.
- You cannot trade in any business under any other name unless you inform all persons concerned of the bankruptcy.
- There may be restrictions on you practising as an Accountant/Solicitor.
- If a Bankruptcy Restriction Order is granted:
- You cannot become a Member of Parliament.
- You cannot act as a Justice of the Peace (JP) or Governor of a School.
- You cannot become a member of the Local Authority.
- The bankruptcy order remains on your credit reference file for six years.
- Any member of your family, or even your employer, could be publicly examined in court if the Official Receiver believes this will aid the investigation
- Your name will appear in the local newspaper under the bankruptcy notices section.
- The information is also displayed in the Individual Insolvency Register (accessible on the Insolvency Service website) until three months after you are discharged.
Assets
Some items aren't treated as assets for this purpose:
- equipment you need for your work (eg, tools or vehicles)
- household items needed by you and your family (eg, clothing, bedding and furniture)
If you have a regular and disposable income you'll be asked to make monthly payments for three years towards your debts based on what the Official Receiver thinks is affordable.
If your circumstances change, you'll need to tell the Official Receiver, so they can review these arrangements.
More Information on Bankruptcy
There's more about how bankruptcy will affect you and associated issues at the links below:
- What will happen to me?
- How are you made Bankrupt?
- Bankruptcy Enterprise Act 2002
- How Bankruptcy Affects Employment
- Questions on Bankruptcy
- Frequently asked questions on bankruptcy
For further information or to discuss the implications for you of going bankrupt please call us on freephone 0800 280 2816 or e-mail us in complete confidence.
Alternatives to Bankruptcy
If you are in serious debt and contemplating bankruptcy, there are other alternatives that can avoid the severe consequences of bankruptcy:
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