What is Bankruptcy?

A Bankruptcy order is a court order that you can apply for if you can demonstrate to a Judge at County Court that you can’t afford to pay all of your debts. One of your creditors can apply for a Bankruptcy Order to be made against you if you owe them more than £750. Bankruptcy affords you the protection of the court from your creditors. Once the order has been made, they are no longer allowed to pursue you for the debt, ever again. This allows you to free yourself from overwhelming debt and make a fresh start. A Trustee in Bankruptcy, (the person appointed to deal with your assets) sells any assets of significant value (not household goods) and distributes the proceeds to your creditors to recoup as much debt as possible.

After your bankruptcy ends your creditors can’t make further claims against you for your debt.

The fact a bankruptcy order has been made in your favour/against you is advertised in the local press, your landlord is told and your employment may be at risk in some occupations and professions.

How long will I be bankrupt?

The general rule is that you will be discharged after a maximum period of twelve months, when you are no longer a bankrupt. This period can be shorter should the Official Receiver complete his enquiries earlier and file a notice to that effect in court. Straightforward cases are currently being discharged in an average of 6 months!

The duration of the bankruptcy can also be altered in the following circumstances:

The court annuls the order on the grounds that all debts have been paid in full.
The court annuls the bankruptcy on the ground that the original order was not appropriate
The discharge has been suspended as a result of failure to co-operate with the Official Receiver Trustee. Only after the breach causing the suspension has been rectified will the twelve month period continue.

Although you are no longer bankrupt once discharged, it will remain on your credit history for 6 years from the end of the Bankruptcy (this also applies for an IVA, i.e. 6 years after the end of a 5 year IVA).

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Alternatives to Bankruptcy

The alternative procedures to Bankruptcy:

Individual Voluntary Arrangement
Debt Management Plan

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