The “small print” for bankruptcy

At PayPlan, we ensure you’re fully informed on all the repercussions of any debt solution. Bankruptcy may seem a quick and easy option, but it could impact you in several ways, so it’s important to consider the following points when considering bankruptcy:

• When you apply for bankruptcy, you must pay a fee of £680, although this can be paid in instalments.
• Some debts are excluded from bankruptcy, including student loans, fines, debts arising from family proceedings such as maintenance orders, and any budgeting loans or crisis loans owing to the Social Fund, so you will still be liable for these.
• Once you declare bankruptcy, you are no longer in control of your assets. A Trustee, normally an Official Receiver, will be appointed to investigate the cause of your bankruptcy and to go through your finances, assets and debts. The Trustee will also assume the rights for and interest in your assets.
• All of your valuable assets, such as your house or other properties, vehicles, jewellery or any household items which are of excess value, are likely to be sold to raise funds, which will be used to pay the fees and costs of your bankruptcy first, then split between your creditors.
• If your Trustee calculates that you have £20 or more surplus income each month, you may be required to pay this surplus into bankruptcy for up to three years. You won’t be expected to make a payment if you solely rely on state benefits.
• If you’re in a regulated profession that requires you to be licensed or registered, going bankrupt may disqualify you. This applies to professions like law, accountancy, banking, and financial services, as well as being a trustee.
• Your career could be impacted through bankruptcy in other ways. For example, your employer may restrict the kind of work you can do, and you might find it more challenging to get a role in certain sectors, such as the police, local government or security companies.
• Your employer may require you to declare bankruptcy to them, so it’s worth checking your staff handbook to determine if this applies to you.
• Your credit rating will be affected for six years following the bankruptcy order.
• Any business you run may be shut down, and the employees dismissed.
• Until you have been discharged from bankruptcy, borrowing more than £500 from any lender is illegal without notifying them that you are bankrupt. If your credit application is lower than this, lenders would generally find out by credit-checking you anyway.
• You will be unable to act as a director of a business during your bankruptcy without the court’s permission.
• You will also need the court’s permission to create, manage or promote a company during your bankruptcy.
• You can’t run a business using a different name without telling people you do business with that you are bankrupt
• Your family and even your employer could be examined in court if the Official Receiver believes this would be beneficial to the investigation, however in practice this happens rarely. 
• Notification of your bankruptcy will be displayed in the London Gazette, an official publication of legal notices, and possibly in your local newspaper.
• Your details are displayed on the Individual Insolvency Register, a publicly searchable database on the Insolvency Service website, until three months after you’re discharged.
• If you have any joint debts included in the bankruptcy, the creditor would look to the person you took the finance out with to pay that debt off in full. If this debt is linked to your credit files, your bankruptcy could also affect the credit file of the person with whom you took out the joint credit.
• Pension payments made during your bankruptcy will be counted as income and may then be required to be paid into the bankruptcy.  if you draw down any lump sum from a pension before you are discharged, you would be expected to pay it into bankruptcy.
• Bankruptcy can affect your immigration status. For example, if you are declared bankrupt, your British citizenship application may be turned down. See the Citizen’s Advice website for more information on bankruptcy and immigration.

If you need free, confidential debt support, call us on 0800 316 1833 from 8am to 8pm Monday to Friday or 9am to 3pm on Saturday. Alternatively, complete our enquiry form and we will be in touch as soon as possible.

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