How long will I be bankrupt for?
Once you are declared bankrupt, the responsibility for paying your debts is taken away from you immediately. Provided that you cooperate fully with the supervisor of your bankruptcy, your bankruptcy will last for 12 months.
If you are paying an income payment order, this will last for a maximum of three years ie it will continue for two years after you are discharged from your bankrupcy.
If you have been bankrupt in the past, the length of your bankruptcy the second time around may be longer than 12 months. In some extreme cases, where it is felt you have acted recklessly or dishonestly then your Bankruptcy may last for up to 15 years.
Will I lose my home, car or personal belongings if I am declared bankrupt?
Your House
As a bankrupt, your title to any house you own or are paying a mortgage on will be passed to the Official Receiver. If there is any equity in the property, the Official Receiver will want to realise this for the benefit of your creditors. This means that either you will need a third party to make an offer to the Official Receiver to buy out your equity or they will force the sale of the property to release the equity.
If your husband, wife or children are living with you, it may be possible to put off a sale until the end of the first year of your bankruptcy to give time for other housing arrangements to be made. Your spouse or any other interested party would be encouraged to take legal advice about the home as soon as possible.
If your house has no releasable equity, or is worth less than the secured debt you have, you may be able to buy back your interest in the property for the nominal sum of one pound plus costs.
Your Assets
If you are declared bankrupt, you will be able to keep reasonable personal items and household goods such as furniture and electrical goods as long as their value is not greater than the cost of their reasonable replacement. However, you will be expected to sell valuable assets such as antiques and any vehicle worth more than £1500.
Which debts are included in a Bankruptcy?
All unsecured debts are included in a bankruptcy. These include but are not limited to:
• Credit Cards
• Personal Loans
• Catalogue Debts
• Store Cards
• Overdrafts
• Outstanding balances after home or vehicle repossession
• Business loans for which you are personally responsible
• Inland Revenue / VAT debts for which you are personally responsible
• Utility bill arrears
• Council tax arrears
The only debts that do survive bankruptcy and remain your responsibility after discharge are Matrimonial, criminal and importantly Student Loan Company debt.
If I am bankrupt will anyone come to my home to check my assets?
The Official Receiver does have the power to investigate if he feels there may be additional assets that could be sold to pay more of the money back to your creditors which you have not truthfully declared on your bankruptcy application form. However, in practice it is very unlikely that someone will come to your home.
What restrictions are there on a Bankrupt person?
If you are bankrupt, you will have certain restrictions against you such as:
• You cannot act as a company director
• You cannot practise as a chartered accountant, solicitor or insolvency practtioner
• Self employed people cannot trade in any other name than their own
• You cannot obtain credit of more than £500 without disclosing your status as a bankrupt.
• There are restrictions on some professions that involve the handling of money or managing accounts.
Will I be allowed a bank account if I am bankrupt?
If you are declared bankrupt, you will be able to have a bank account and manage it yourself.
If you owe money to your bank, perhaps in the form of a credit card, personal loan or overdraft, you will almost certainly need to open a new account with a different bank. The reason for this is that to resolve a debt problem, you need to be able to ensure that you are in full control of your money and keep your income separate from all your creditors.
If you need to open a new account, you should ask for a basic account only with no overdraft facility. You should be able to do this even if you have a poor credit rating. There are many banks which offer this facility.
How long does it take to become Bankrupt?
Once you have completed the application which you get from your local court, you would need to attend court on the date they provide. This varies depending on how busy the courts are but can be completed within a month if all your paperwork is presented and the application form filled out correctly.
Can I still run a business while I am bankrupt?
While you are bankrupt, you cannot be the managing director of a limited company or be involved with the management of such a limited company. However, you can still operate as a sole trader as long as you are trading under your own name.
If you are the director of a limited company perhaps you should consider an IVA or Debt Management Plan.
If you are employed it is important to check your employment contract to see if your job is effected by being bankrupt. This could be the case if your job has any financial links, e.g. accountancy etc.
What happens after I am discharged from my Bankruptcy?
After you are discharged from your bankruptcy (normally after 1 year), your outstanding debt is written off and you will be debt free. You will also be free to carry out things which you were restricted from doing as a bankrupt – for example be a director of a limited company.
Who knows that I have been declared bankrupt – is it made public?
Friends and Family?
One of the major disadvantages of bankruptcy used to be that it was publisied in the local newspaper. Since April 2009, whether or not to publish the bankruptcy is left up to the discretion of the official receiver. It is therefore likely that your name will not appear in your local newspaper unless you are a sole trader or the official receiver feels there is any other good reason for doing so.
Your name and address is recorded on the national insolvency register that is accessible to the public via the internet. However there would have to be a reason for someone to actively check the register.
Your Employer?
Your employer is not formally notified of your bankruptcy, but it is possible they may find out if the court applies for an attachment of earnings (where a payment is taken straight from your wages for your creditors). This is easily avoided however by making your monthly payments to your trustee when asked to do so.
Your Landlord?
If you are renting your property, your landlord will be told that you have been declared bankrupt. Therefore it is advisable to discuss this with your landlord before the event. Most landlords will be happy for you to remain in the rented property even if you are declared bankrupt as you will no longer have the burden of unsecured debt and are therefore more likely to be able to maintain your rent payments.
What will happen to my credit file whilst in Bankruptcy?
Your bankruptcy is recorded on your credit file for 6 years from the date that you are declared bankrupt. Obtaining credit after this time is harder at first obviously, but in time you can repair your credit file and should be able to gain credit in the future.
How much will I pay each month if I am Bankrupt?
You will only pay towards your creditors if you can afford to do so. If you have any money left after paying all of your reasonable monthly living expenses, you may be asked to pay this to the Official Receiver in the form of a income payments order.
If your income is solely made up of benefits it is extremely unlikely that you will have to pay anything towards your debt each month.