Bankruptcy - Last resort or fresh start?

What is Bankruptcy?

In a nutshell Bankruptcy is a legal procedure in which the inability of a client to pay her/his debts in acknowledged and the majority of unsecured creditors can no longer pursue their debts, which are eventually written off. This can be done either on the basis of a request from the individual or from one or more of the creditors.

Criteria for Bankruptcy:

• Debts have arisen which creditors will not write off
• The client does not own a home or has little or negative equity
• The client does not have any available assets or capital
• The client has a low available income in comparison to the amount of debt which means it would take many years to repay
• The client is not intending to be in business or trade on his/her own in the next few years.

The Bankruptcy Process

Bankruptcy Petition

If you want to declare yourself bankrupt you have to start the process by filing a Bankruptcy Petition. If you file for bankruptcy yourself, the bankruptcy petition is called the Debtor's Petition.

If you want to file for bankruptcy you should contact your local court. They will give you the details of your nearest county court that deals with bankruptcy hearings. You can find the contact details for your local court by visiting http://www.courtservice.gov.uk.

If you are being forced to go bankrupt by your creditors then they will file the Bankruptcy Petition. This is called a Creditor's Petition and it can only be filed by people to whom you owe more than £750.

When you file the petition for bankruptcy you will also have to pay £370 into court. This amount covers the Court Fee and the Official Receiver's deposit. If a Bankruptcy Order is not made by your local court then the deposit will be refundable, but the Court Issue Fee is not.

Do be aware that filing a bankruptcy petition does not prevent your creditors from contacting or trying to sue you.

Hearing of the Bankruptcy Petition

Once you have filed your bankruptcy petition, a court date will be set for the initial hearing. This hearing is called the Hearing of the Bankruptcy Petition. At this hearing one of the following things will happen:

• The bankruptcy proceedings will be delayed because more information is needed for the court to be able to decide whether to issue a Bankruptcy Order.
• The Bankruptcy Petition that has been filed will be dismissed.
• An Insolvency Practitioner will be appointed to set up an Individual Voluntary Arrangement instead.
• A Bankruptcy Order will be made. You will be declared bankrupt the moment that this order has been made.

Bankruptcy Order

Once a Bankruptcy Order has been made then an Official Receiver is nominated to look after your affairs. The Official receiver is a civil servant and an officer of the Court. If you want to declare yourself bankrupt then you will be asked to attend an initial meeting with the Official Receiver. During that meeting you will discuss the reasons why you are filing for bankruptcy and the Official Receiver will assess your assets and liabilities. A trustee will then be appointed unless you do not have any assets.

The trustee is responsible for selling any property that you own and splitting the proceeds from the sale amongst your creditors. After this, any debt that you owed your creditors will be legally struck out and they will be forbidden from trying to collect any more money from you.

You will be automatically discharged from bankruptcy normally one year from the date of the Bankruptcy Order.

The next steps

Dissolve Debt understands that bankruptcy is an option that should only be considered when every alternative avenue has been explored/researched and taken as a realistic solution to a debtors well being for free confidential advice about bankruptcy please contact us using the form opposite or contact us on 0800 0122 111.

The possibility of obtaining an individual voluntary arrangement (IVA) should always be considered before deciding on bankruptcy.

The IVA procedure - Ten short steps outlining the procedure of an IVA from start to finish.

For more information about IVA's click here » IVA approvals plummet
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