Your rights in bankruptcy - what you need to know


Although bankruptcy has a bad stigma and is publicly advertised, it should always be considered when you have severe financial problems.

Bankruptcy is one way of dealing with debts you cannot pay.

The bankruptcy proceedings:-
    1.    free you from overwhelming debts so you can make a fresh start, subject to some restrictions
    2.    make sure your assets are shared out fairly among your creditors.

Anyone can go bankrupt, including individual members of a partnership. There are different insolvency procedures for dealing with companies and for partnerships themselves.

How are you made bankrupt?

An individual can be made bankrupt either in one of three ways:

  • Voluntarily - By the debtor themselves.
  • Involuntarily - By the creditor owed money (£750 Minimum).
  •  The supervisor or anyone bound by an IVA

A bankruptcy order can still be made even if you refuse to acknowledge the proceedings or refuse to agree to them. You should therefore co-operate fully once the bankruptcy proceedings have begun. If you dispute the creditor’s claim, you should try and reach a settlement before the bankruptcy petition is due to be heard. Trying to do so after the bankruptcy order is made is both difficult and expensive.

What are the implications of bankruptcy?

  • You lose control of your assets.
  • You cannot obtain credit for over £250 without the permission from the lender.
  • You cannot act as a company director.
  • You cannot take any part in the promotion, formation or management of a limited company (LTD) without the permission of the court.
  • You cannot trade in any business under any other name unless you inform all persons concerned of the bankruptcy.
  • You may not practice as a Charted Accountant / Lawyer.
  • You may not act as a Justice of the peace (JP)
  • You may not become an member of parliament.
  • You may not become a member of the local authority.
  • Your credit is affected for many years after the annulment.
  • You may be publicly examined in court.

    What are the advantages of bankruptcy?
  • For the person involved, bankruptcy provides relative peace of mind and possible automatic discharge after one year (or less in some cases).
  • For the creditors, bankruptcy allows a full investigation of the debtor's affairs to be carried out.

    SOME COMMON QUESTIONS THAT PEOPLE ASK ABOUT BANKRUPTCY

    Can I Keep My Car In Bankruptcy?

You can be allowed to keep a car in bankruptcy but there are a few requirements for this: you have to show a need for a car, the car must be of modest value and the Receiver must allow any expenses associated with having the car.

Will I Lose My House In Bankruptcy?

You can be allowed to keep your property in bankruptcy, however this can be a complicated procedure and best to speak to someone to clarify your full situation.

Can I Get A Mortgage If I Have Been made Bankrupt?
It is not impossible to obtain a mortgage after being bankrupt as in order to get a mortgage there are many factors considered, and credit history is just one of these factors.

Will My Employer Be Notified Of My Bankruptcy?
While bankruptcy is a matter of public record, your employer is usually not notified as long as you can provide any information the Receiver may require related to your wages/earnings, etc.

There can be some instances where a NT or no tax code is placed on your wages and your employer may know what this is related to. You may wish to speak to an advisor to discuss this in more detail and if it will be an issue for you.

What Options Are There Besides Bankruptcy?
The options available to you to avoid bankruptcy will depend on each persons set of circumstances. The most popular alturnative is an IVA (Individual Voluntary Arrangement). You must have a disposable income and you must be able to maintain a repayment for 60-months that is affordable to you. The IVA will give you the same benifits as Bankruptcy, you're able to protect your home and assets whilst writing a large portion of your debt off.  

Can I Have A Mobile Phone If Bankrupt?
You are allowed a mobile phone in bankruptcy, just as you are allowed all of your basic living expenses.

Anyone can go bankrupt, including individual members of a partnership. There are different insolvency procedures for dealing with companies and for partnerships themselves.

 

 

Disclaimer

Whilst every effort is made to ensure that the legal information contained on “YouandYourRights” is accurate, it does not constitute legal advice tailored to your individual circumstances. If you act on it, you acknowledge that you do so at your own risk. Neither the Proprietor nor Dean Dunham can assume responsibility and do not accept liability for any damage or loss which may arise as a result of your reliance upon it.

 

 

Last updated: 1 November 2011

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