A Guide to Bankruptcy
By my late twenties I was burdened with debt.
Ever heard someone say: “go to University and get a super job”, or “start a business, you’ll do great”? Well, I did both. But my business entered troubled times, and became insolvent. Facing up to my situation, I saw that bankruptcy was my only option. From the moment I sought help, I had much clearer direction and was able to take pro-active steps to solve the predicament in which I found myself.
Now that I am through to the other side, I run an organisation providing help for people facing bankruptcy. Here’s my basic guide to bankruptcy.
What is bankruptcy?
Bankruptcy is a legal process that allows you to clear debts that you cannot repay. To declare yourself bankrupt you will have to present two forms, namely a bankruptcy petition and a statement of affairs, to the court that will deal with your bankruptcy. You will also have to pay the required fee. Once the bankruptcy order has been made your affairs will be investigated.
The benefits of bankruptcy
The main benefits of bankruptcy are as follows:
• A fresh start (usually all debts will be cleared and the bankruptcy will be over in one year)
• You will lose contact with your creditors; they will have to deal with the Official Receiver administering your bankruptcy
The consequences of bankruptcy
During bankruptcy you will be subject to bankruptcy restrictions. You cannot:
• Get £500 or more of credit either alone or jointly with any other person without informing the lender of your bankruptcy
• Carry on business (directly or indirectly) in a different name from that in which you were made bankrupt, without telling all those with whom you do business the name in which you were made bankrupt
• Be concerned (directly or indirectly) in promoting, forming or managing a limited company, or acting as a company director, without the court's permission, whether formally appointed as a director or not
Also:
• You may lose assets of any value, but not always. Some assets are exempt
• You may lose your family home, though in some situations you may be allowed to keep it
• Some previous transactions may be reversed or altered, for example repaying family members prior to bankruptcy
• If you have a disposable income then you may have to make payments to your bankruptcy estate for the next three years
• Your credit rating will be affected
• You will be subject to the aforementioned bankruptcy restrictions
• Your affairs will be investigated and subsequently the restrictions of bankruptcy that you are subject to could be prolonged for between 2 and 15 years if you are found blameworthy
Experiencing uncertainty and stress can often be an unforeseen consequence.
The importance of seeking advice
Given that bankruptcy can be a complex legal process, it is important to seek advice in order to make sure that bankruptcy is your best option, remove any uncertainty and reduce the stress involved.
There are a number of charities offering help with bankruptcy (see useful links), or if you can afford it, it is worth considering a specialist bankruptcy consultant. The help that you will receive will usually be more substantial and should cost in the region of £250 to £1000.
It is important to remember that there are alternative ways to deal with debt. These alternatives may be more suitable than bankruptcy, and should always be investigated. Remember to seek help and advice earlier rather than later.
For more information about bankruptcy visit Mark's Bankruptcy Website. This guide provides an overview of bankruptcy, is not a statement of the law, is relevant to England and Wales only and is correct at the time of writing.
Written by Mark Davis.
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