Bankruptcy

BankruptcyBankruptcy, which is often seen as the ‘last resort’ is a means of dealing with personal debt problems, which is why professional advice must be sought by anyone considering this option. However, in certain circumstances, it can be the appropriate solution. Bankruptcy is a formal Court led process.

There are two ways into bankruptcy:

  • Debtor’s petition – this is where you decide to make yourself bankrupt, and
  • Creditor’s petition – this is where a creditor (someone to whom you owe money) petitions the Court for you to be made bankrupt. A creditor cannot petition for your bankruptcy unless they are owed at least £5,000.

Essentially, anyone who goes bankrupt gets rid of all their unsecured debts BUT this option can have serious consequences. The Trustee effectively takes control of your assets, and will sell these to raise cash for your creditors and, if you own your home and it has equity, you could lose it.

Whilst you are bankrupt, various restrictions will apply to you, the main ones being that you cannot obtain credit of more than £500 and you cannot be a director of a limited company or be involved in the promotion, formation or management of a limited company. If you have surplus income, you may be required to pay monthly contributions from income for a period of three years.

In the majority of cases individuals can be expected to be discharged from bankruptcy after one year.  However, individuals can be made the subject of a Bankruptcy Restriction Order (“BRO”) which imposes restrictions that apply after a bankrupt has been discharged. These restrictions apply for a period of between 2 and 15 years and are imposed to protect the public from those bankrupts whose conduct has been irresponsible or reckless.

At Dunion & Co, we have many years of experience in dealing with personal insolvency matters and will be happy to provide you with advice on which process is the most appropriate for your circumstances.  We will advise you on all the advantages and disadvantages of bankruptcy in order for you to make an informed decision.

We will explain what happens when you have your interview with the Official Receiver’s office. Please contact Dunion & Co. today by calling 01782 828 733 or e-mailing us on enquiries@dunionandco.com.

Advantages of Bankruptcy

  • All unsecured debt will be written off, generally after one year.
  • If you live in rented property, and your rent is paid up to date, you should be able to remain in the property.
  • You have little to lose and all your debts will be written off at the end of the bankruptcy period.

Disadvantages of Bankruptcy

  • Control of your assets passes to your Trustee in Bankruptcy.
  • All assets, apart from those required for a reasonable standard of living, will be sold.  This could include your home, after one year.
  • You cannot be a director of a limited company or involved in its management.
  • Your job could be at risk; certain trades and professions will not employ bankrupts.
  • Cannot obtain credit over £500, unless you first disclose that you are bankrupt.
  • Any income you have in excess of that needed for your reasonable needs will have to be paid to your Trustee for the benefit of your creditors.
  • Your credit rating will be affected (probably for some time after your bankruptcy ceases) and there may be other restrictions, such as having your bank and credit card accounts closed.
  • Your bankruptcy will be advertised online and in the London Gazette.

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