Bankruptcy

Filing for Bankruptcy is a major decision but, once taken, it can help some people draw a line under their debt and start afresh. The Bankruptcy period normally lasts for one year, but could affect both your current employment and your future career choices. Certain professions and occupations are closed to, or do not look favourably upon, Bankrupts.

When filing for Bankruptcy, you will normally be embarking upon a one-year period of restrictions and possible a three-year period of income payments. Unlike with an IVA , you don’t get a say in choosing the Licensed Insolvency Practitioner who will be your Trustee in Bankruptcy.

If you file for Bankruptcy, the courts will appoint a Trustee in Bankruptcy, either an Official Receiver, or a Licensed Insolvency Practitioner. The Trustee in Bankruptcy has the right to sell most of the Bankrupt’s assets. The Bankrupt can seek to have certain assets, such as a modest vehicle, excluded on the grounds that they need it to get to and from work.

Bankruptcy is not a private matter. Filing for Bankruptcy requires a notice to be published in your local newspaper, and in a publication called the London Gazette.

If you have equity in your home, filing for Bankruptcy and mean that the Trustee in Bankruptcy will look to realise that equity by whatever means. However, if your spouse or children are living with you, you may be able to defer any sale of your home until the end of the first year after your Bankruptcy. After that time, the interests of your creditors will usually come first and the court will only refuse an order for sale in exceptional circumstances, or if your interest in the property is worth less than £1,000. Before seeking an order for sale, the Trustee in Bankruptcy would usually offer the Bankrupt’s spouse the option to buy the Bankrupt’s interest in the property. If they are unable or unwilling to make that payment the Trustee in Bankruptcy could obtain an order forcing the sale, regardless of whether there are children or other dependents living there.

The stigma associated with Bankruptcy has diminished over the last 20 years. Before 1986, an individual was Bankrupt for seven years and had to apply in court for their discharge from Bankruptcy. On 29th December 1986, discharge from Bankruptcy became automatic after three years. In 2004, this time period was further reduced to twelve months, although a longer time period may apply in certain circumstances. Since then, the Bankruptcy figures have rocketed upwards; the more Bankrupts there are, the less stigma there is.

Filing for Bankruptcy is available for all levels of debt over £750. It is often the right choice for those who have debts over £15,000 and little or no spare cash each month after their cost of living has been deducted.