What is Personal Bankruptcy?
Personal Bankruptcy is the legal process by which a consumer or Sole Trader / informal partnership business with unmanageable and irrecoverable debt problems asks the Court to provide protection from creditors while the debtor’s financial affairs are resolved.
Furthermore, any creditor who is owed more than £5,000 (in England and Wales) can ask the Court to declare a debtor bankrupt in order to recover any available assets to resolve outstanding debts.
Personal Bankruptcy is designed to provide a debtor with a fresh start to his/her financial life by wiping the slate clean. However, there are implications that all debtors need to be aware of before any such steps are taken. If you are facing financial difficulties, it is important that you seek expert advice at the earliest opportunity for the best outcome.
What is the Process of Personal Bankruptcy?
You can make an application to the court yourself under a debtor's petition or an application could be made by one of your creditors' under a creditor's petition.
Once an order is made the Official receiver will be appointed to deal with the administration of your case.
Depending upon the complexity and value of your case the Official Receiver may appoint an Insolvency Practitioner to deal with the case as Trustee in Bankruptcy.
You will not have any say in the appointment of the Insolvency Practitioner, and in practice, he could be situated anywhere in England or Wales.
The Official Receiver's (or the Trustee's) role is to realise your bankruptcy assets (if any), agree creditor claims, distribute any dividends and investigate any matters arising that he considers appropriate.
All calls from creditors' can be referred to the Official Receiver or Trustee.
You will be automatically discharged after one year from the date of the Bankruptcy order or if the Official Receiver has completed all his enquiries.
The Official Receiver or Trustee can apply to have the automatic discharge suspended if his enquiries are ongoing.
Any debts not paid from the recoveries made by the Official Receiver or Trustee will be written off.
There is no restriction on the value of your assets or the level of your creditor or your income (as with a DRO).
Advantages of Bankruptcy
You are protected by the court from all your creditors’ debt recovery actions with immediate effect.
All payments to unsecured debts can be halted immediately and directed to the Court to register their claims.
The Court will appoint someone, either the Official Receiver or a Trustee, to manage your financial affairs on your behalf.
Once your bankruptcy is officially discharged, your debts will be written off and you can start over with a clean slate.
Implications of Bankruptcy
Your repayments could be extended for up to 3 years if an Income Payments Order is issued against you.
A Bankruptcy Court Order legally overrides any attempts to give away property to third parties (including a spouse or partner) unless a fair market value is paid. Any transfers must take place a minimum of 5 years beforehand.
The terms of bankruptcy may include an entitlement to any future assets such as wills or an increase in future earning capacity if these assets were realised during the period of your bankruptcy.
It is the decision of your bank or building society whether to continue allowing you banking facilities.
You will be unable to work in certain professional capacities or your bankruptcy may have to be disclosed when applying for certain jobs for a period of time after the bankruptcy.
How Griffin & King Can Help
Whether your situation is disputed or not, we have the experience to adopt the right approach to achieve your objectives.
Our experienced advisors are on hand to explain the intricacies of insolvency and personal debt and talk you through your options. We will talk you through your options and provide you with impartial, regulated advice.