Understanding Bankruptcy
Summary
There is nothing nice about bankruptcy but if you are having to face it, it is worth knowing the course of action. This article gives an insight into the procedure
If you have serious debt you might be contemplating bankruptcy. It is important to know what bankruptcy necessitates and whether it is the right selectionfor you.
Bankruptcy what is it? Bankruptcy is a transitory legal position. Whilst bankrupt, your non-essential assets like possessions, property including excess income are used to pay off your creditors. Most debts are discharged at the end of the bankruptcy period. This can be an effective means of clearing debts you would never be able to pay.
What is the time limit for bankruptcy?. Bankruptcy ordinarily lasts for 1 year. After this period, you’ll be ‘discharged’ from your bankruptcy regardless of how much you still owe. Discharge can occur earlier if you co-operate fully with the Official Receiver. Although, in a small number of cases and if you’ve conducted yourself foolishly, bankruptcy can remain for much longer than one year.
How to become a bankrupt? A court pronounces you bankrupt by issuing a ‘bankruptcy order’ after it has been presented with a ‘bankruptcy petition’. Generally this occurs in 1 of 2 ways.
1st , you can apply for your own bankruptcy. A debtor’s petition form can be downloaded from the Insolvency Service website or got from county courts with bankruptcy jurisdiction. The form should be filled in and then taken to the county court nearest to you, that has bankruptcy jurisdiction. A fee of 150 pounds and deposit of £360 is payable at this time. This amount cannot be waived.
A creditor making you bankrupt. Your creditors can serve a creditor’s petition if you owe them an unsecured debt over 750 pounds. When the bankruptcy proceedings are underway, you must co-operate wholly even if it’s a creditor’s petition and you dispute their claim.
From where do bankruptcy orders come from? Bankruptcy petitions are in general put forward in a county related court near where you reside or trade.
Who would have to deal with your bankruptcy? As soon as a bankruptcy order has been issued against you, your creditors will not be able to chase you for repayment. Payment of these bills becomes the responsibility of the trustee. An Official Receiver is selected if you have no assets. If you do have assets, an Insolvency Practitioner will be selected to act as trustee and sell your assets to pay the money owed to your creditors.
What happens once you become bankrupt?. After you’re bankrupt, the Official Receiver, or appointed trustee, can sell your assets on your behalf to pay your creditors. Although, particular goods aren’t classed as assets for this purpose, for instance: required work equipment and needed household items such as clothing, bedding, furniture.
The Official Receiver assess your income taking into account expenses and decide if payments can or should be made to your creditors. You will probably be required to sign an ‘income payments agreement’ to pay fixed monthly instalments from your income for 2 years.
What are your obligations?. You are obliged: Give the Official Receiver details of your financial situation, creditors and assets, and take them to the Receiver with the applicable paperwork, like insurance policies and bank statements notify your trustee of any income or assets, throughout your bankruptcy cease using credit cards or store cards and bank or building society accounts, not apply for credit over 300 pounds without revealing to the creditor that you’re bankrupt, not make payments direct to your creditors. You may also have to go to court and state why you’re in debt.
If you are deliberating making yourself debt advice or you are being threatened with bankruptcy, it’s important to get independent advice.