Bankruptcy Services

Bankruptcy results from the making of a Bankruptcy Order by the Court following the presentation of a Bankruptcy Petition.

A Petition can be presented by:-

The individual himself/herself

A creditor of the individual owed more than £750

The Supervisor of an IVA

Bankruptcy affects only individuals. Those individuals may include persons operating a business as a sole trader or in partnership with others as well as those with credit card and loan debts. The period of Bankruptcy is generally one year but can be shorter when the Bankrupt gets early discharge. Where an Income Payments Order is in place this will continue for three years irrespective of the date of discharge from bankruptcy. In instances where the Bankrupt fails to co operate with the Trustee or is guilty of offences the period can be extended beyond one year by a Bankruptcy Restriction Order.

The assets of the individual automatically vest in his/her Trustee. The Trustee may be the Official Receiver or an Insolvency Practitioner.

It is the duty of the Trustee to realise the assets which form the estate of the debtor. This will include the equity in any house owned by the bankrupt.

The Trustee discharges the fees and costs of the bankruptcy proceedings and distributes the balance of funds to creditors in the order to which they are entitled.

Advantages of Bankruptcy

• All debts at the date of bankruptcy are included in the bankruptcy proceedings. The debtor has no ongoing liability in respect of those debts.
• Creditors are dealt with by the Trustee.
• In instances where the bankrupt has surplus monthly income after the payment of living expenses he/she may be required to make a payment under an Income Payment Order in respect of their bankruptcy debts. There are no other payment obligations.

Disadvantages of Bankruptcy

• A bankrupt is subject to restrictions on obtaining future credit.
• A bankrupt cannot act as a company director and may be prevented from acting in their profession
• The assets of a bankrupt which comprise his estate automatically vest in the Trustee. The bankrupt no longer has title to these assets and is prevented from dealing with them.
• The bankrupt has a duty to co operate with his/her Trustee. If the bankrupt fails to co operate they can be required to attend a Public Examination. The period of Bankruptcy can be extended
• Society still holds a negative perception of bankruptcy.

 More information

To access information on a range of debt solutions, please visit  www.gov.uk/pay-off-debts 

Please download the following PDF for more information “In Debt – dealing with your creditors”