What is bankruptcy?
Bankruptcy is a debt solution for those who are insolvent, which means that they cannot pay their creditors when their bills are due, or that their total debts are bigger than the value of their assets.
When declaring yourself bankrupt, you are stating that you are unable to pay off your outstanding debts, and you pass the responsibility for your debt repayments to a trustee, who will either be an Official Receiver or an Insolvency Practitioner.
Any person in England, Wales or Northern Ireland who is struggling to pay off their debts can choose to apply for bankruptcy, but this option should always be considered alongside other available debt solutions. Those in Scotland would apply for Sequestration, the Scottish equivalent of bankruptcy.
It is usually a last resort as it typically involves the trustee selling some of your assets, which may include your house and car if they are deemed of excessive value. For example if you owned a very expensive house or vehicle, you may be expected to downgrade these in order to repay as much of your debts as possible.
Bankruptcy usually lasts for a year, after which time the debts within the bankruptcy will be written off. You may be required to make payments from your earnings into the bankruptcy for up to three years by way of an income payments arrangement, but only if you had more than £20 a month of surplus income. If your only income is state benefits, you would not be required to make these payments.
If you are in financial difficulty and you or your creditors are considering making you bankrupt, speak to PayPlan today for impartial, expert advice on the other options that may be available to you. Call us FREE on 0808 278 3071. We are available from 8am to 8pm Monday to Friday, and 9am to 3pm on Saturday. Alternatively, complete our simple enquiry form and one of our team will be in touch as soon as possible.
In the UK, the term bankruptcy only applies to individuals. The equivalent terms for an insolvent business are administration or liquidation.