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Bankruptcy: A Concise Guide
By Benedict Rohan
Definition of bankruptcy:
Bankruptcy is one method
of getting out of debt. It is a court order that transfers
responsibility for dealing with creditors to the Official Receiver, who
also takes control of the debtor’s money and assets and distributes
them fairly to all their creditors. Once all debts have been paid or
written off or an agreement reached, the individual is able to make a
fresh financial start.
A order is granted by the court when it receives a petition
(application) from either the debtor
or one or more of their creditors if the amount owed is more than
£750 in unsecured debt.
Bankruptcy has its advantages and disadvantages although it’s an
extreme measure and should be considered very carefully. Just because
you’re in a lot of debt, it doesn’t mean that is your only
option. You’ll need to speak to a financial expert who’ll advise on the
best course of action for you. Some useful sources of help are the
Citizen’s Advice Bureau, the government Insolvency Service, the
National Debtline or the Consumer Credit Counselling Service.
Advantages of bankruptcy:
your creditors will be dealt with by the receiver
court action against you to recover money may be stopped
your debts may be written off
you’ll be allowed to keep a certain amount of money and household
items to give you a reasonable standard of living
you’ll be able to make a fresh start when the order
has been cancelled
Disadvantages of bankruptcy:
you may have to pay a court fee of up to £475 for the
bankruptcy order
not all debts can be written off – e.g. court fines
your details will be entered onto a public register of bankrupt
individuals so other people will find out about it
you won’t be able to apply for any more credit while the
bankruptcy order is in force
you may lose your home or any luxury possessions that you own if
they have to be sold to repay your debts
if you own a business, it may be closed down and the assets sold
you could lose your job depending on your employer and what
profession you work in – some don’t allow individuals who become
bankrupt to continue working
you may be subject to a restriction order, which can
make it very difficult to take out credit or other financial products
homeowner loans in
the future – this might happen if you have been reckless with your
finances or have been dishonest or uncooperative with the Official
Receiver
Petitioning for bankruptcy:
Bankruptcy orders are arranged by your local court. You’ll need to fill
out a couple of forms – a petition and a state of affairs, which can be
obtained from your local court or from the government’s Insolvency
Service website (www.insolvency.gov.uk). You’ll need
to list all your
debtors and all your assets – from bank accounts to valuable
possessions. It’s a criminal offence to make a false statement on these
forms, so you must be truthful. It’s also illegal to sell any items
before the order or to hide any goods that you own.
The court will review your case and will only grant you a bankruptcy
order if it feels that you have no other means of solving your debt
problems. Once the order is in place, your accounts and assets will be
frozen and the Official Receiver will investigate your finances. First
they will interview you. Then they’ll give notice of your bankruptcy
order to various bodies, such as your local authority, sheriff court,
land registry, utility companies, banks, insurance companies, landlords
and solicitors, in order to determine what debts you owe and what
assets you have. Once the Official Receiver has compiled a
comprehensive report on your finances, a copy will be sent to all your
creditors and your assets divided equally among them.
You’ll normally be discharged from your order within a year,
by which time your debts will either have been paid back or written off.
Alternatives to bankruptcy:
If your debts haven’t gone too far down the line, it may be possible to
come to an informal arrangement with your creditors that will allow you
to repay your debt in a manageable way. You can try to negotiate a
repayment plan in which you make your repayments in affordable regular
instalments. It may cost you more in interest in the long term, but it
could be a more viable option than bankruptcy.
If this doesn’t work, a formal, legally binding arrangement called an
Individual Voluntary Arrangement may be able to be set up with your
creditor. You’ll need the services of an insolvency practitioner to
arrange this.
Alternatively, insolvency practitioners also offer debt management plans, in
which they take on management of your debts for a fee.
If one or more creditors has obtained a county court judgement against
you and the total owed is less than £5,000, you may be able to
apply for an administration order at your local court, under which your
repayments to your creditor are made via the court, which takes a
portion of the repayment for administering the repayments. Free Article brought to YOU by ArticlesOn.com, where you'll find Articles On Everything! Visit http://articleson.com to get more free content. Biography:Author: Benedict RohanWebsite: www.mortgagenation.co.ukBenedict Rohan works as a freelance finance writer. Commercial Mortgage, Homeowner Loans, Remortgages
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