Reference - Guide to Bankruptcy
Here is a useful guide to bankruptcy. It should be noted that
bankruptcy is not to be entered into without first having sought
professional advice.
Bankruptcy is seen as the last resort. Bankruptcy is perceived to be
the only way to escape the ever-constant demands for payment by bill
collectors and credit companies alike.
Bankruptcy is not something that should be rushed in to. Certainly
there are times when it can be very useful, but there are other times
when declaring bankruptcy would be a big mistake.
The purpose of bankruptcy is to convert your possessions, and any
wages you receive, into lump sum and instalment payments for creditors.
A debtors purpose to apply for their own bankruptcy is to form a
moratorium (a group of creditors) to agree part repayment of all
outstanding debts, and when the agreed repayment has been met, to have a
‘clean slate'.
The constraints which are put upon you once you are declared bankrupt
make it only a viable option in the most extreme of cases. It is more
likely that an Individual Voluntary Arrangement will be the answer to
severe debt problems, since it provides much of the relief offered by
bankruptcy but without the severe constraints which bankruptcy imposes.
Individual creditors cannot take action against you. They must make a
claim through the ‘trustee' (the name of the person who controls a
bankruptcy) or write off their debt.
When appointed the trustee will advertise your demise in a number of
newspapers to give all of your creditors a chance to make a claim
against the bankruptcy.
It is also the responsibility of the bankrupt to make an honest list
of all creditors: as a bankruptcy is also a chance to start again the
bankrupt should ensure every creditor is notified. Not that a creditor
could make a claim against you after a bankruptcy, but it will get all
your creditors of your back.
A bankruptcy order takes precedence over all other forms of debt
recovery. All creditors have the right to be included in the list of
creditors, and benefit from any payment arrangement.
If you own your home you would be fortunate to keep it. You can keep
household ‘essentials' such as, bed, fridge, heating appliances but not,
TV's, video recorders, computers - unless used for work, or used to get
work.
All ‘tools of trade' are protected, but will be scrutinized.
A bankruptcy will normally last until the third anniversary of the
bankruptcy order. During this time you are not allowed to hold a public
office, become a company director (or in all but name run a business)
and you must not apply for credit over £250 without notifying the lender
of your bankruptcy.
Your credit file will show your bankruptcy for six years from the
bankruptcy order.
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