There has been a lot of publicity surrounding changes in the law regarding bankruptcy. These changes were included within the Enterprise Act introduced in April 2004. Many people have suggested that after these changes, Bankruptcy has been made easier.

Certainly, for some individuals, the new rules may be of benefit. However, it is arguable that for the majority of people, the law has not made bankruptcy any easier, and in some aspects, it has become more onerous. The decision whether to declare bankruptcy will still very much depend on your personal circumstances. 

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Non homeowners

If you are renting your property and have serious debts which you are unable to repay, Bankruptcy should always be considered as an option for resolving the problem. If you declare bankruptcy but maintain your rent payments, there should be no reason why you cannot remain in your home.

If you have a disposable income and are able to maintain monthly repayments to your creditors, you will be asked to do so for up to 3 years. The Official Receiver will consider any assets that you own and decide whether these should be sold for the benefit of your creditors. This will not include reasonable household items or the tools of your trade.

If you have a car, the Official Receiver will decide if this is essential for your everyday life or whether it would be reasonable for you to give it up. Often if you need your car but the value of it is more that £1500, the Official Receiver will look at the option of you selling the car and buying a cheaper one with the proceeds of the sale going to your creditors.

After 1 year you are likely to be discharged from your bankruptcy and can then continue with your life debt free.

Homeowners

If you are a homeowner, the decision whether or not to declare bankruptcy will be less clear. The issue is that in Bankruptcy, the title to any equity owned by you in your property will be transferred to the Official Receiver. It is then the Receiver’s duty to realise this equity for the benefit of your creditors.

If you have little or no equity, you may be able to declare bankruptcy and keep your house. However, if there is significant equity in the property, it is likely that you will have to move out of the house and it will be sold. Under these circiumstance it may be more sensible to consider an IVA or Debt Management Plan.

Company Directors

While you are bankrupt, you cannot be a director of a limited company or be involved with the management of a company. For this reason, although Bankruptcy may only last for one year, it is often not suitable if you are a director of a limited company. Under these circiumstance it may be more sensible to consider an IVA or Debt Management Plan.

A public matter

Bankruptcy is a public matter. However since April 2009 generally speaking if you are declared bankrupt, your name and address will not be published in the local newspaper where you live. This change was largely introduced to reduce the administrational costs of bankruptcy. However, t is still up to the Official Receiver whether to place a public advertisement or not.

In general if you are self employed or run a sole trader business, your bankruptcy will still be advertised in the local press.

It is important to note that your bankruptcy will still be recorded in the insolvency register which is publically accessible via the internet. See: http://www.insolvency.gov.uk/eiir/