If you can’t avoid bankruptcy what do you need to know?

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Bankruptcy compared with the other debt solutions

If Bankruptcy is the way you want to go or just want to find out more read on

There are only a few ways to become bankrupt. On this page we're going to explore these ways and offer some really valuable advice on bankruptcy that will really help you move forward with a little more confidence.

Creditors Petition for Bankruptcy

One of your creditors can bring a bankruptcy petition against you if you owe £750 or more by either serving what is called a statutory demand. This demands payment within 3 weeks. If you can’t pay it you creditor can issue a petition to make you bankrupt.

Or

If a creditor has a judgement against you e.g. CCJ, and the bailiffs have not managed to seize goods to the value owed, you creditor can miss out the statutory demand phase altogether and go straight to the bankruptcy petition.

Once a bankruptcy petition has been made you’ll get a court date for a bankruptcy hearing. At this point you can:

1. Pay your debt plus any costs before the hearing
2. Ask for an adjournment on the grounds that you can convince the court that you can raise the money in a relatively short period of time
    

If it goes to court, a bankruptcy order will be made.
 

You, ‘the debtor’, petitions for Bankruptcy
 

You can bring you own petition for bankruptcy. The steps are:

1. You go to your local county court to get the necessary paperwork
2. You complete the paperwork and ask for a bankruptcy hearing
3. You take the form and cash to the hearing and after spending a few minutes before the court a bankruptcy order will be made

Joint Account Warning

If you hold a joint account, be aware that the non-bankrupt owner of the account will have their money seized as well. They will get it back if this does happen but it will take time. Tell them to open another account ASAP. Don’t let them take or transfer any money that is not really theirs however tempting.

After the bankruptcy order is made

Once the bankruptcy order is made all of your assets and property vest (is put under the control of) your trustee. Initially this will be the official receiver who will want details of your accounts and other information. You’ll also need to have a face-to-face interview or telephone interview with the official receiver.

Things to expect include:

• A visit to your business if you have one so your assets can be seized
• You bank accounts and building society accounts will be frozen even if they are in joint names (monies owned by another person named on the account will be returned but just don’t expect this to happen quickly)
   

The offcial receiver interview

You must make the interview when asked to do so. If you’re luck, you may be asked to have the interview over the phone, but if you are asked to go in person you must go. There are no excuses.

The interview is conducted by a member of the official receivers team and often lasts a few hours. What they are looking for is wrongdoing.

During the interview they will work though what is called your statement of affairs. This is a form you will complete that looks at your financial history and other related matters. The purpose of running through this is to once again check that you have behaved properly and lawfully.

Further examination

If the trustee / insolvency practitioner or official receiver believes you may have hidden away assets of sold them off illegally e.g. too cheaply, then you may be asked to take part in either a Public Examination or Private Examination to did deeper into your affairs. The courts have extensive powers to ask for information from anyone who has had dealing with you, and can even examine a person they think may help under oath.
 

The meeting of creditors and possible an insolvency practitioner

The official receiver may decide that a creditors meeting is necessary. If he does it must happen within 12 weeks of the bankruptcy order being made.

If you own goods and property of a high value, a meeting to appoint an Insolvency Practitioner. You don’t normally have to go to this one.

You’ve been made bankrupt – what next?

Let’s start by looking on the bright side. Your creditors aren’t chasing you anymore. And but for some restrictions and issues that will cause life sometimes tricky. Here’s what to look at for and what you need to know.

Bankruptcy and Bank Accounts

It’s not illegal to get a bank account if you are an undischarged bankrupt or even a discharged bankrupt. The problem is, it’s difficult to find a bank that will do business with you. Here’s a link to a page that more information on bankruptcy and bank accounts.

Building Society Accounts

It’s with building societies that you have the best chance of a normality. Open a savings account with a cash point card and the ability to pay wages into and you’re away. You can’t save money without it being seized by your trustee but you can use it to run a normal cash-in cash-out account. Some good advice here is to wait for a couple of months after being made bankrupt so that your new account doesn’t get caught in the regular updates informing banks and building societies of new bankrupts.

Bankruptcy Utility Bills & Council Tax

You don’t have to pay your gas, electricity or phone up to the date of being made bankrupt. Each utility company will deal with bankruptcy in a different way and it’s not impossible you’ll be cut off. When you get service restored you may have to pay a deposit or pre-pay for services.

The same goes for Council Tax. You’ll not pay the pre-bankruptcy debt but will pay for very day thereafter. If you share your property they will need to pick up the whole bill.

The selling off of your property

The trustee appointed whether the official receiver or an insolvency practitioner will have the task of realising the maximum amount of value from your property. Property includes anything that has a monetary value and does extend to property owned by your business if you have one.

There are however a few very important exclusions that you’ll need to know as there may come a time when you need to use this information. You are allowed to keep:
“tools, books, vehicles and other items of equipment as are necessary to the bankrupt for use personally by him in his employment, business or vocation” in addition to “clothing, bedding, furniture, household equipment and provisions” necessary for satisfying the basic domestic needs of you and your family.

However there are conditions and those conditions centre around how valuable the property that falls into the above groups can be. A rule of thumb that is frequently used is £500. So if you have a car that is worth more than £500 that you use for work, chances are you’ll need to see it and get one for £500 or less and give what’s left over to your trustee. If your trustee tries to bend these rules push back – hard!

Once your property is realised, should you’ll need to answer any further questions your trustee has and if your income or circumstances change and you acquire money or possession, you’ll need to tell them for up to 3 years after being made bankrupt.

Further reading:

• Bankruptcy Questions & Answers
• Debts written off if bankrupt
• Inhertitance and Bankruptcy
• Bankruptcy and Joint Mortgages
• Bankruptcy, Work and Jobs Allowed
• Income Payment Orders and Income Payment Agreements
• Selling possessions and property before bankruptcy
• Bankruptcy and Limted Company Directors
• Help filling out bankruptcy forms
• Bankruptcy and Credit Rating