Your lenders may file a Bankruptcy petition (Creditor’s Petition) if you owe them more than £750.
However, in order for you to declare yourself bankrupt you must firstly fill in a Bankruptcy Petition (Debtor’s Petition).
Once the petition has been filed, a court date will be set for an initial hearing. This first hearing will decide whether or not a Bankruptcy Order should be made.
If a Bankruptcy Order is made, you will be declared bankrupt.
A Bankruptcy Order can still be made even if you refuse to acknowledge or agree to the order. Therefore you should try to co-operate fully once the Bankruptcy proceedings have begun. If you dispute the lender(s) claims you should try and reach a settlement with them before the Bankruptcy Order is made, as trying to do so afterwards is difficult and expensive.
If you go bankrupt you may have to pay the following:
- The Court Fee of £175 (if you receive means tested benefits you may be exempt or be able to pay a reduced fee).
- The Official Receiver Fee or Deposit of £525
If you are a couple and are both applying for Bankruptcy, you will each have to pay separate fees.
Baines & Ernst’s sister company, Baker Evans, provide an optional Bankruptcy Support Service that helps people throughout this process – ensuring all paperwork is present and correct to make the transition as soon as possible. The service fee £450.
Bankruptcy is probably one of the most well known forms of debt help because it is often talked about in the press, which is why many people assume it’s the only way to get out of debt.
For some people, Bankruptcy is the right option, but it is one of the most severe options available so you should always find out if your debt problems could be resolved with a solution such as a Debt Management Plan, IVA, Protected Trust Deed, or Debt Relief Order.
If you’re unsure which solution would suit you best, speak to a member of our team and we will happily carry out a no-obligation financial review for you, click here to contact us.
You can also view a free publication from The Insolvency Service ‘In Debt? Dealing With Your Creditors.’
You can keep any tools, books, vehicles (if low value) and other items of equipment needed personally in your employment or business. You will also be able to keep your clothing, bedding, household furniture, basic household items and certain pension entitlements.
You will lose control of larger assets, such as your home, as these will be sold to raise money to repay your creditors.
The Court will either hear your petition straightaway or arrange a time for the Court to consider it.
Those who require an interpreter must arrange this themselves and pay the interpreter’s fees.
At the hearing, the Court can do one of the following:
- Stay (delay) the proceedings because the Court needs further information before it can decide whether to make a Bankruptcy order.
- Dismiss the petition because an administration order would be more appropriate.
- Make an order referring you to an approved intermediary if it is believed that a Debt Relief Order (DRO) may be appropriate
- Appoint an Insolvency Practitioner if they think that an Individual Voluntary Arrangement would be more appropriate. This will only be possible if you have not been bankrupt or entered into an Individual Voluntary Arrangement or Debt Relief Order in the previous five years. If you do not wish to enter into such an arrangement, you should inform the Court.
- Make a Bankruptcy Order. You will be bankrupt the moment the order is made by the Court.
Until your Bankruptcy is discharged:
- You can’t hold certain public offices.
- The trustee controls all of your assets including your home.
- You can only conduct business using the name under which you were made bankrupt.
- You can’t form, manage, act as a company director or promote a company without the court’s permission.
- In certain circumstances your employment may also be affected. You should check with your Human Resource department.
- You may open a new bank or building society account but you should disclose the fact you are bankrupt.
- You cannot obtain credit over £500 without first disclosing the fact that you are bankrupt.
- In certain circumstances, your employment may also be affected. You should check with your Human Resource department.
- If you live with a partner and / or children, then a period of 12 months may be allowed for other living arrangements to be made. At the end of the 12 month period, the property will almost certainly have to be put up for sale, enforced by a Court Order if necessary. If you own the property with someone else they may be able to make an offer to buy out your interest in the property from the Official Receiver.
- Any assets you acquire during your Bankruptcy will become the property of the trustee.
After you are discharged from your Bankruptcy:
- The above constraints are ended
- Your Bankruptcy will be registered with credit reference agencies and this will usually stay on your credit file for 6 years.
- Even after this point, if you apply for a mortgage, you may still have to declare that you were bankrupt.
- Depending on your earnings, your trustee may require you to make contributions to your lenders out of your income. The amount that is paid to creditors is determined by the amount that you can reasonably afford after your normal cost of living expenses have been deducted from your income. This is called an Income Payments Order (IPO), and if applicable it will remain in force for three years from the date of Bankruptcy. This means that even though you may have been discharged from your Bankruptcy after one year, you will still have to continue paying your IPO for a further two years.
When you go bankrupt, you must provide information about your financial affairs – handing over control of your assets, bank statements and insurance policies to the Official Receiver.
- You may have to attend court to explain why you’re in debt.
- You are not allowed to make any direct payments to your lenders.
- Any bank, building society accounts, credit cards or similar must no longer be used.
If you are worried that your credit rating may stop you from opening a new account, take a look at the Evolution Current Account.
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*UK residents aged 18 and over. Subject to satisfactory identity and residency checks. The Evolution Current Account is managed by Secure Trust Bank PLC.
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