Over our years of working within insolvency, we have been asked many questions by people facing Bankruptcy or who are already Bankrupt. When designing this website, we thought that it would be best to summarise those queries that have been raised most frequently. If you have a question that you would like to ask, please contact us. We will be happy to reply to you directly and keep this page updated.
Who is it that decides that I should be made Bankrupt ?
It always used to be that the Court made you Bankrupt, if that was the decision of a Judge. The petition to Court could be made either by you if you believe you are insolvent or by a creditor if you owe them more than £5,000.
Now, if you wish to declare yourself Bankrupt, you can make an application online at the Insolvency Service website. It does cost you and the price is currently £680. Your application will be considered by an adjudicator.
What happens to me if I am made Bankrupt ?
Initially, all of your assets will come under the control of the Official Receiver ("OR"). If there are enough assets he may consider passing your Bankruptcy to an IP, like us at Sadlers, who will become your Trustee.
You will also have to comply with various restrictions concerning what can and can’t do whilst Bankrupt and your name will be put on the Individual Insolvency Register Individual Insolvency Register.
How does a Trustee get appointed ?
The OR may call a meeting of creditors or the Secretary of State may pass your case to the next IP on a rota.
Will I lose all my assets ?
No you will be allowed to keep household goods, tools of your trade and, normally, a car unless it is very expensive.
What if my car is expensive ?
There are provisions in the Insolvency Act 1986 that allow a Trustee to take possession of any item of significant value and replace it with something more modest. This could apply to a car or, equally, to an antique table.
Who has first claim on money raised by selling my assets ?
The order of priority for paying out of a Bankruptcy estate are set out in the Insolvency Rules. Generally, they go to the petitioning creditor, if any, for their costs, the costs of the OR, taxation, expenses, the costs of the Trustee and then the creditors. If an asset has a charge to a creditor, such as a mortgage on a property, that creditor jumps the queue.
Do I have to lose my home ?
Not if it’s rented.
If you own your home, the OR or Trustee will consider whether it is worth more than the mortgage secured upon it. If it is, it is not definite that the property will be sold. You will usually have at least 12 months to put forward an offer to buy out the equity and keep the property.
The Trustee is required by law to take steps to recover your interest in your home within three years. If they don’t the interest will revert to you and you can keep the property.
Will I be Bankrupt for life ?
Not if you play by the rules. A Bankrupt will normally be discharged after 12 months and any unpaid debts are then written off. However, the OR can apply for a Bankruptcy Restrictions Order (BRO) if they think that your conduct prior to or during your Bankruptcy falls below the standard expected. For example: if you do not declare an asset.
If I get a BRO, what can and can’t I do ?
A BRO will last for between two and fifteen years. The exact rules for your situation will be set out in the Order but during that time you are likely to face restrictions on what you can borrow. You are unlikely to be allowed to be a director too.
So, if I can’t pay my debts, do I have to go Bankrupt ?
No. You should speak to us and we will assess whether you may be suitable for a Debt Relief Order or an Individual Voluntary Arrangement (IVA).
I’m already Bankrupt, but think that I shouldn’t be.
All is not lost. You should contact us immediately. We will be able to advise you if you could apply for the Bankruptcy Order to be set aside, seek an annulment, or even still propose an IVA.
What does it mean to set aside the Bankruptcy Order ?
If the Order shouldn’t have been made by the Judge, for various technical reasons, then you can ask the Court to put you back in the same position as before the Order was granted.
How does setting a Bankruptcy Order aside differ from an annulment ?
If you apply for an annulment, you’re not saying that the Order making you Bankrupt was wrong, you’re simply showing that you have enough assets to pay all your debts and the costs of the Bankruptcy.
Something we’ve not covered yet ? Send us a query via our contact page and we’ll answer you and add it to this section too.