Filing For Personal Bankruptcy
If you’re struggling to repay your debts, you may be considering bankruptcy. This is a legal process that can help you get your finances back on track. Before you make the decision to file for bankruptcy, it’s important to learn about the process and what it will mean for your future.
What is bankruptcy?
Bankruptcy is a legal status that applies to individuals who cannot repay their debts. In the UK, bankruptcy proceedings are managed by the Insolvency Service, an executive agency of the Department for Business, Innovation and Skills. Once an individual is declared bankrupt, their assets are sold off and the proceeds are used to pay their creditors. Bankruptcy can be initiated by either the debtor or their creditors, and it typically lasts for 12 months. During this time, the bankrupt individual is subject to a number of restrictions, such as being unable to obtain credit over £500 without declaring their bankruptcy. Once the 12-month period is over, the individual is discharged from bankruptcy and their debt is written off. However, they will still have a record of their bankruptcy on their credit file for six years.
Who can make me bankrupt?
It is possible to file yourself for bankruptcy in the UK, but it is important to understand the consequences before taking this step. Bankruptcy will stay on your credit report for six years, making it difficult to obtain credit during that time. You will also be required to give up any assets that you have above a certain value, such as your home or car. In addition, bankruptcy can affect your employment prospects, as some employers may be reluctant to hire someone who has declared bankruptcy.
Nobody else can make you go bankrupt, but a professional advisor may tell you it’s your best option if your financial situation is not looking well.
How Do I File for Bankruptcy?
First, you must file a petition with the court. This petition must include a statement of your assets and liabilities, as well as details of your income and expenditure. Once the petition has been filed, a hearing will be scheduled. At this hearing, you will need to present your case to the court and convince them that bankruptcy is the best option for you. If the court agrees, they will issue a bankruptcy order. This order will have a number of consequences, including the sale of your assets and the loss of your credit rating. As such, it should not be taken lightly. If you are considering filing for bankruptcy in the UK, seek professional advice first to ensure that it is the right decision for you.
Applying for bankruptcy with the court
You can file for bankruptcy with the court using this online form hosted on the UK Government website.
How much will the bankruptcy cost me?
£680
Why do I need to pay to become bankrupt?
Paying an adjudicator (£130). They will decide whether your application for bankruptcy is accepted. The remainder (£550) goes towards paying your deposit for the bankruptcy application.
Can I pay the bankruptcy fees in instalments?
Yes, but you can’t submit the application until the full balance is paid.
In how many instalments can I pay the bankruptcy fee?
You can pay the fee in as many instalments as you like. The minimum payment is £5.
I want to pay the bankruptcy fee in cash
Yes, that is possible, but you won’t be able to pay in instalments. It’s better to pay online.
If my bankruptcy application fails, do I get my money back?
Only the deposit, which is approximately £525.
Are all my debts covered by the bankruptcy?
Most debts are covered by the bankrutpcy. Scroll down to read the debts that are not covered.
Which debts are not covered in a bankruptcy?
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Debts due to magistrate Court fines.
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Child support payments and other family related debt.
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Student loans taken from the Student Loans Company.
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Secured debts i.e. debts secured against an asset.
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Debts you owe someone because of personal injury or death caused.
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Social fund loans.
What is protected in a bankruptcy?
There are some items that are protected in bankruptcy. Generally, most of the household items won’t be sold unless the trustee thinks they can be replaced with suitable and cheaper alternatives. These items include:
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Clothes.
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Bedding.
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Furniture.
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Household equipment – cooker, washing machine etc.
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Any items necessary for basic family needs.
Which items can be sold in a bankruptcy?
Any items not required for your job or business or don’t fall under basic home needs can be sold, such as:
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Antiques.
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Jewellery.
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Leisure equipment such as games consoles and cameras.
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Vehicles.
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Caravans.
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Your house.
Are personal bankruptcy files on the public record?
If you go bankrupt, you can’t keep it private. When a bankruptcy order is made, creditors, banks, internet suppliers, energy suppliers and local authorities are informed. Details of your bankruptcy will be published in the “Insolvency Register”. The insolvency register is a publicly available list of people who’ve been declared insolvent.
Will my spouse be affected by bankruptcy?
If you’re financially connected to someone like your partner, declaring bankruptcy could negatively affect them. A financial connection could be a joint bank account or shared loan or mortgage. If possessions are jointly owned, they could be sold to repay debts. The money from those possessions is usually split between the creditors and your partner.
Bankruptcy and debt
- Debt related to fraud
- Debt shared with others
- Debt with a guarantor
- Am I exempt from paying my mortage?
- What about debts related to my business?
- What about hire purchase goods?
You are protected from debts by fraud during the bankruptcy period. The only difference is that once the bankruptcy ends, although all other debts are written off, any debt by fraud won’t be. This means you’ll have to find another way to pay this off.
If you have a debt with someone else, you’ll be protected during the bankruptcy but they won’t be. Creditors can still chase them for the full amount. If a debt is shared by two or more people, they would all have to apply for bankruptcy.
If someone has taken a guarantee on your debt i.e. they’ve signed a document to say they’ll pay any debt you can’t, they will still have to abide by their responsibility as guarantor, even if you are made bankrupt.
No. Your mortgage and house bills still need to be paid. Only if your house is repossessed and does not have enough value to pay off the mortgage will any shortfall be written off under a bankruptcy.
If you run a Limited Company, any debt that business accumulates is the responsibility of the business and not you, the Director, personally. However, if you are a sole trader, working in a partnership or a freelancer, all business debt is your personal responsibility and personal assets to repay debt. It is this type of debt that is covered by bankruptcy.
Any hire purchases are not protected by bankruptcy, so you can lose them if you don’t keep up with repayments. You can still be evicted by a landlord during a bankruptcy.
Is bankruptcy right for me?
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You genuinely can’t see another way to pay off debt
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You don’t own many assets that could be used to pay off debt
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You can’t see how your situation will improve
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You have lived or worked in England and Wales in the last three years
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You don’t live permanently in another European state (except Denmark)
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When a professional association forbids bankruptcy
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You don’t want your debt issues to be made public
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If you are confident your financial situation will improve in the future
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You have lived or worked in England and Wales in the last three years
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If you have a pension that is larger than your debt
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If you still have assets, after bankruptcy is complete, you will be liable for some extra fees.
Anything that is considered ‘spare’, for example, savings or large assets like a property.
- £6,000 – general fee
- £1,900 – admin fee
- 15 percent of money raised from assets sold- trustee fee
- The actual cost of selling your assets
When someone is struggling to repay their debts, bankruptcy can seem like a last resort. However, there are actually several advantages to declaring bankruptcy in the UK. For one thing, it provides a fresh start for people who are overwhelmed by debt. Once someone is declared bankrupt, they are no longer legally responsible for repaying their debts. This can be a huge relief for people who have been struggling to make ends meet. In addition, bankruptcy can help people to keep their home by protecting them from creditors. Finally, bankruptcy can also help people to get their finances back on track by providing them with structure and guidance. While it is not right for everyone, bankruptcy can be a helpful tool for those who are struggling to repay their debts.
While bankruptcy can be a useful tool for those in serious financial trouble, it also comes with a number of disadvantages. One of the biggest drawbacks is that it can have a major impact on your credit rating. This, in turn, can make it difficult to obtain credit in the future. Bankruptcy also stays on your record for six years, which can make it difficult to find employment or rent property. In addition, certain assets, such as your home, may be required to be sold off in order to pay creditors. As a result, bankruptcy should not be undertaken lightly and you should always speak to a financial advisor before making any decisions.
One of the most important things to remember is that you can still apply for credit during bankruptcy. While your options may be limited, there are still ways to get the credit you need. You can start by checking with your local banks and credit unions to see if they have any special programs for people in your situation. Additionally, there are a number of online lenders that cater to people with bad credit. By doing your research and shopping around, you should be able to find the right lender for your needs.
It’s important to bear in mind you will likely need to get a guarantor for any new credit accounts you open. Additionally, your credit score will be adversely affected by bankruptcy, so you may not qualify for the best interest rates.
Bankruptcy in the UK can have a number of implications for your life insurance policy. If you have a policy that was taken out before you were declared bankrupt, the trustee in bankruptcy may request that the policy be surrendered in order to repay your creditors. If you have a policy that is in force at the time of your bankruptcy, the proceeds will usually be exempt from your estate and will not be used to repay your creditors. However, it is important to note that if you make any withdrawals from the policy before you are discharged from bankruptcy, these withdrawals may be considered to be preferential payments and could be subject to clawback by the trustee.
Other bankruptcy considerations
You will need separate arrangements to manage these.
Bankruptcy may stop you from receiving British citizenship
No, because sponsoring someone means telling the Home Office that the person you are sponsoring won’t need financial help from the Government because they will be taken care of by you. During a bankruptcy, your financial situation is not the healthiest, so you cannot sponsor anyone.
You could, provided you can prove that your financial position is now healthy.
Your credit rating will be impacted negatively. Your borrowing power will become considerably weak.
If you are made bankrupt in the UK, your pension may be affected. The Official Receiver (OR) will look at all of your assets, including your pension, to see if any of them can be used to pay off your debts. If you have a private pension, the OR may ask you to release some of the funds so that they can be used to pay off your creditors. However, there are some types of pension that are protected from bankruptcy, such as certain public sector pensions and personal pensions with a trust deed. If you are not sure whether your pension is protected, you should seek legal advice.
In some cases, you may be able to have your bankruptcy cancelled if you can prove that you’ve repaid your debts, or if your creditors agree to a debt payment plan. You may also be able to have your bankruptcy annulled if it can be shown that you were not eligible for bankruptcy in the first place. If you’re considering cancelling your bankruptcy, it’s important to seek professional advice before taking any action. Only a qualified insolvency practitioner will be able to give you accurate and up-to-date information about your bankruptcy.
Six years from the date you become bankrupt.
Miscellaneous Bankruptcy Questions
The bankruptcy register contains the details of all individuals who have been made bankrupt and is accessible for free to any member of the public.
Lenders and landlords would usually run a name through the register to check if the individual has been made bankrupt. It helps them decide whether to lend money or rent their home to the individual.
A bankruptcy court handles high-profile bankruptcy petitions.
Cases where the debtor owes at least £50,000 and is based in London.
The court may consider including it if there is no reasonable hope in paying the debt off independently.
Bankruptcy fraud is when someone deliberately says something false on a bankruptcy application.