What is Bankruptcy?
Bankruptcy is a method of dealing with debts which you can not possibly repay. It is normally seen as a last resort, after all other options for repaying debt have been exhausted. If you are declared bankrupt, you will no longer have to repay your creditors yourself and the court will protect you from any further actions that your creditors threaten against you.

Bankruptcy has a poor stigma attached to it because bankruptcies are publicly advertised and means that the bankrupt individual no longer has control over his/her assets. Your assets are shared out fairly between your creditors (those you owe money to). However, bankruptcy should still be considered as an insolvency option as it frees the debtor from overwhelming debts to make a fresh start (with a few restrictions). Bankruptcy can provide peace of mind by offering the chance to be free from debt after just twelve months.

If you do face bankruptcy, consider the alternatives. An Individual Voluntary Arrangement (IVA) is an alternative debt solution to bankruptcy.
There are two kinds of bankruptcy and two bankruptcy registers. Indvidual bankruptcy includes individuals, partners and sole traders. Commercial bankruptcies include insolvency procedures for companies and partnerships.

How Long Will Bankruptcy Last?
One year. If you were made bankrupt on or after 1 April 2004, you will be automatically discharged from bankruptcy after 12 months. This period may be shorter if the Official Receiver concludes his enquiries into your affairs and files a notice in court.

If the court annuls your bankruptcy order, you will immediately be free from bankruptcy. This can happen if your debts, plus bankruptcy proceedings fees and expenses have been fully paid, or if the order shouldn’t have been made in the first place.

Discharge from bankruptcy:

• Releases you from most of the debts you owed at the date of the bankruptcy order (with exceptions including fraud related debts and fines).
   
• Enables you to borrow money or carry on trading in business without previous restrictions opposed on you as a bankrupt. You can also act as a limited company director, unless you have been a previously disqualified director.

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If you were made bankrupt before 1 April 2004 and this is your first bankruptcy, you will have been automatically discharged on or prior to 1 April 2005.

If you have been an undischarged bankrupt before your current bankruptcy (unless the previous bankruptcy was annulled) you will automatically be discharged on 1 April 2009. If this is the case, you can ask the court for a discharge 5 years after the date of the bankruptcy order.

If you do not abide by the rules of bankruptcy and fail to carry out your responsibilities, the Official Receiver can apply to the court for your discharge to be postponed.

If unsure about when you will be discharged from bankruptcy, you can contact your local Official Receiver offices.

So, once made bankrupt – what can you no longer do?
You cannot:

• Control your own assets as you lose control of them.
• Obtain credit for over £250 without permission from the lender (your credit can in fact be affected for many years after discharge or annulment).
• Be a company director.
• Be involved in the promotion, formation or management of a limited company without permission from the court.
• Trade in any business under a different name unless all persons involved are informed of your bankruptcy.
• Practice as a Lawyer or Chartered Accountant
• Become a Member of Parliament (MP)
• Act as a Justice Of The Peace (JP)
• Become a local authority member.

How Bankruptcy Works
Anyone can go bankrupt. An individual can be made bankrupt voluntarily (themselves), involuntarily (by creditors owed a minimum of £750), or by the supervisor of an IVA, if the person going bankrupt has failed to meet the terms and conditions of their IVA.

Voluntary Bankruptcy
The first step is contact your local County Court (you will find the address and telephone number of your local County Court in the telephone book). You will have to ask the court for an application form. The court will also be able to provide you with further information.
You will normally have to arrange a meeting at the court with a member of the Official Receiver’s office where you will discuss all aspects of your application. If the Official Receiver believes that you should go bankrupt then you will be able to do so on the same day. You must expect to pay a fee to the court of between £250-£350 towards the court fee and administration of your bankruptcy.

Involuntary Bankruptcy
Even if you refuse to agree to bankruptcy proceedings or refuse acknowledgement of proceedings against you, a bankruptcy order can still be made. Therefore, it’s it your own interest to full cooperate. Of course, if you do not agree with the creditor’s claim and wish to dispute it, you can attempt to settle before the bankruptcy petition hearing. If you wait until the bankruptcy order is made, attempting settlement is much more difficult and costly.

Bankruptcy Advantages/Disadvantages Responsibility for paying your debt is taken away from you immediately and you are protected from your creditors by the court. You may have to make a monthly contribution towards your debt while you are bankrupt, but this is based only on what you can afford. You will normally be debt free in 1 year or less.   You will have to pay an up-front court fee and administration charge to the court of between £250 and £300 You will be required by the court to realise valuable assets including equity on your home, expensive jewellery, antiques, expensive cars, and so on. Essentially you lose control of your assets. Bankruptcy is a public proceeding and your name will appear in the local paper and the London Gazette. You cannot continue to practise as a professional person or a director of a company during the period of bankruptcy. A note of your bankruptcy will be kept on your credit file for 6 years, which means, even after being discharged (released) from your bankruptcy, you may find it difficult to get credit or a mortgage.

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