How Bankruptcy works
How to declare Bankruptcy
When you’re in a position where you can no longer afford to repay your debts, we understand how stressful and worrying this time can be.
We will carry out an initial assessment to ensure this is the right solution for you and to find out if your debt problems could be resolved with an alternative debt solution such as a Debt Management Plan or an IVA.
For some people Bankruptcy is their only option. We provide a Bankruptcy Support Service and can guide you through the process so that you can start living your life free from debt once again.
Three steps of Bankruptcy
Click the steps below to find out more
Complete a Bankruptcy petition:
Once you have completed the Bankruptcy petition and have sent it to the courts for approval, a date will be set for an initial court hearing. This hearing will determine whether a Bankruptcy Order will be made or not. If a Bankruptcy Order is granted, you will then be declared Bankrupt.
You will have to pay Bankruptcy fees in order to go Bankrupt.
– £180 (depending on your financial situation)
Official Receiver Deposit:
Couples applying for Bankruptcy will each have to pay separate fees.
Our Bankruptcy Support Service will guide you through this process and ensure all paperwork has been completed correctly and on time. The service fee for providing this service is £450 for new customers, £675 for couples or in some cases, free to existing Baines & Ernst customers. You will have the option to pay this fee in instalments to make it easier for you to afford.
Your assets are passed to a Trustee:
You will be appointed an Insolvency Practitioner or Official Receiver who will act as your Trustee during the Bankruptcy process. They will take control of valuable assets including your home, and will make arrangements for these to be sold and payment to be made to your lenders. The Trustee will also deal with your lenders on your behalf, so you will not have to speak to them regarding your debts.
- Could be free from debts in 12 months
- Reduce pressure caused by debts
- Protection from lenders
Bankruptcy: What you need to know
Only unsecured debts can be included in Bankruptcy, this means debts that are not secured against your property or something you own.
Included in Bankruptcy:
- Personal loans
- Payday loans
- Store cards
- Credit cards
- Catalogue accounts
- Bank overdrafts
In some circumstances…
- Rent arrears (from previous properties or current housing association property)
- Mortgage arrears
- Council Tax Arrears from previous properties
- Last year or the previous year’s Council Tax from current property
Excluded from Bankruptcy:
- Mortgage repayments
- Social funds and crisis loans
- Hire purchase loans (e.g. car loans)
- Secured loans
- Utility bills
- Student loans
- Child maintenance
- TV licence
Bankruptcy is considered to be one of the most severe ways to clear debts because you could lose your home, car and valuable assets. These will often be sold to help repay your lenders.
If you have children living at home, you will normally be given up to 12 months to find suitable alternative accommodation.
Although you will normally be discharged from Bankruptcy after 12 months, your Bankruptcy Order will be registered with the Credit Reference Agency and will remain on your file for 6 years after completion. This will affect your credit rating and ability to secure credit in the future.
Even after this time, you may still have to declare that you were bankrupt – especially if you’re applying for a mortgage. Ultimately, you will have to re-build your credit rating over a number of years.
Once you have been declared Bankrupt, you will be appointed a Trustee who will take control of all of your assets such as your home and car and will arrange for these items to be sold to help repay your lenders. If you have any concerns, you can speak directly to your trustee. What’s more, your Trustee will take care of all the arrangements – so you never need to talk to your lenders again.
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 lenders is determined by the amount that you can reasonably afford after your normal living costs 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.
Bankruptcy can have a big affect on many areas of your life – including your career. For example, if you own a business, you could be asked to close it down to help repay your creditors.
Also, if you work within the financial sector or in certain public offices, your employment could be affected. Always check with your Human Resources department if you’re in doubt.
There are certain times when you will need to tell people that you have been made Bankrupt. For example, you will have to declare that you have been made bankrupt when opening a bank or building society account, or if you apply for a mortgage.