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Consumer Bankruptcy

Monday, 27th April 2009

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Before going bankrupt explore ALL your options. Get confirmation that bankruptcy is the ONLY option left to you and your pension is safe.  Need debt help then see our list of not for profit debt advice agencies.

New - Changes in applying to go bankrupt

From 6 April 2016, residents of England and Wales seeking to make themselves bankrupt will no longer need to apply to the court. Instead they will complete an online application on GOV.UK, which will be submitted to an Adjudicator employed by The Insolvency Service.

Online applications will be less expensive and, for the first time, will be able to be paid for in instalments.

You can read more here New - Bankruptcy on-line application / procedure

 

The most common questions and answers for consumer bankruptcy

Q How much does it cost to go bankrupt?

From the 21 July 2016, the cost of going bankrupt in England and Wales will increase by £25 to £680, this is made up of the:

  • £130 adjudicator fee (as from 6 April 2016) - no change
  • £550 bankruptcy deposit - increase £25

Q Will my name, address and occupation be advertised in the local paper if I go bankrupt?

As from the 6th April 2009 most honest and co-operative consumer bankrupts will not be advertised in the local paper. Those bankrupts that are seen not to co-operate or not reveal all their assets or liabilities may still be advertised, plus any other cases that the Official Receiver feels warrants public interest.

Will I be able to keep my house in a bankruptcy?

If you own your home then your home will be seen as an asset and will become part of the 'bankrupt’s estate' and will, subject to certain exceptions already in place, be controlled by the OR or Trustee as necessary. The Act however changes the way the dwelling house is dealt with, briefly:

Trustee in bankruptcy has 3 years from the date of bankruptcy to deal with the bankrupt’s interest in his/her sole or principal dwelling house, the bankrupt’s spouse or former spouse, following which period it will revert back to the bankrupt, in other words it will no longer be a part of the bankrupt’s estate unless the trustee;

  • applies for an order of sale or possession.
  • applies for a charging order to cover the value of the interest.
  • realises the interest.
  • reaches an amicable agreement with the bankrupt regarding the interest.

There are occasions whereby you can keep the house, usually this is when there is little or negative equity (the difference between the mortgage and the value of the home). You will need to get advice.

Q Is my pension safe in a consumer bankruptcy?

Most pensions were safe prior to April 2015, however from this date new pension reforms will be in force which could lead to a consumer near the age of 52 years or older that has goes bankrupt losing some or all of their pension entitlement. You can read more about this here - How will bankruptcy affect my pension?

The government has introduced new pension reforms which will enable an individual who has a pension to cash in all of their pension fund. This entitlement could be enforced by an Insolvency Practitioner (IP) or Trustee that is appointed to oversee an individual's bankruptcy who is deemed as entitled to access their pension. Such action could be to cash in all of the pension to pay creditors or use any disposable monthly income, payable via the pension, to meet an Income payment Agreement (IPA) or Income Payment Order (IPO).

Q Can an IVA reverse a Bankruptcy?

If the creditors agree to your proposal, then the Bankruptcy can be annulled. There would be solicitor’s costs in addition to the arrangement fees.

Q What is an Income Payment Agreement (IPA) in bankruptcy?

This is a legally binding written agreement between the bankrupt and the Official Receiver or Trustee that requires the bankrupt, or a third party, to make specified payments to his or her Trustee for a specified period. This will be enforceable as if it was an Income Payment Order (IPO) made by the Court. An IPA will detail the period for which it is to have effect and that the period can apply after the bankrupt has been discharged. The agreement will not extend more than three years after the date of the IPA. The IPA can be varied in writing.

Q What is an Income Payment Order, IPO in bankruptcy?

This is an order of payment made by the court. Upon the application from the Trustee in bankruptcy the Court issues an order that the bankrupt makes a payment to the Trustee in contribution towards his or her debts, this order will usually last for 3 years. These orders are generally not contested and can only be varied upon application to the Court by either the Trustee or bankrupt.

Q Where can I get help and advice to see if bankruptcy is right for me?

Debtwizard.com

  • Call 03339 870 180  (Mon to Thu 9.00am - 8.00pm, Friday 9.00am - 6.00pm)
  • Or complete the rapid debt help form and we will call at a time that suits you.

It is important to remember that every instance must be decided upon its merits. What has proven to be right for one individual may not necessarily be correct for another. Age, working potential, assets and implications are all factors that need to be considered carefully before selecting bankruptcy.

REMEMBER, it is not a crime to be in debt - always insist that you are treated with respect.

Q What are the key points of the new legislation?

Under the Enterprise Act 2002, those made bankrupt after April 2004, will generally be discharged after 1 year, less in some circumstances for example where the bankrupt has cooperated with the Official Receiver, “OR”, and or Trustee and matters relating to the bankrupt’s conduct and affairs has not been raised by creditors. The OR can file a notice at Court detailing that the investigation of the bankrupt’s affairs have been concluded or is unnecessary. In some instances it is proposed that the bankrupt will be discharged upon the date the notice is filed into court and this could be a matter of weeks.

The bankrupt will not be discharged if there is a Court order suspending his or her discharge. This will be made if the bankrupt has not cooperated with the OR or Trustee in bankruptcy, then the term will be extended.

Q What are my restrictions as a bankrupt?

You will be required to:

  • Not take on any further credit of £500 or more without informing the lender that you are bankrupt.
  • Stop using your bank account and any credit cards etc immediately. The Official Receiver will guide you as to what type of account you may hold. This is usually a basic account.
  • Cooperate with the Official Receiver. You may well be asked to attend his/her office for interviewing, in some instances this can be done over the telephone.
  • Notify the OR of any windfall or financial gain during the bankruptcy.
  • The OR may also place other restrictions upon you.

Q What is a Bankruptcy Restriction Order (BRO)?

If the official receiver considers that you have acted dishonestly, or are blameworthy in some other way, they will report the facts to court and ask it to make a bankruptcy restrictions order (BRO). A BRO is a court order imposing certain restrictions on a bankrupt for a set period between 2 and 15 years. They were introduced to ensure the small minority who are reckless or dishonest are subject to restrictions for a longer period than is automatically imposed on all bankrupts. The court will consider this report and any other evidence put before it, and will decide whether it should make a BRO. If it does, you will be subject to certain restrictions for the period stated in the order.

What is a Bankruptcy Restriction Undertaking (BRU)?

If the official receiver notifies you that they intend to apply for a BRO you can offer a bankruptcy restrictions undertaking (BRU) which has the same legal effect as a BRO but does not involve going to court. As you have accepted the official receiver’s allegations, the period of the BRU is likely to be shorter than if the court had made a BRO.

This imposes restrictions on a bankrupt whose conduct has been negligent or reckless. These will generally apply after the bankrupt has been discharged and can run for between 2 and 15 years. Examples of being negligent or reckless would be gambling, borrowing money knowing you cannot afford to repay it, paying off family and friends in preference to the lenders that would feature in your bankruptcy.

Q Are there many consumers going bankrupt?

We have a list of individual insolvencies (bankrupts and IVAs) in England and Wales since 1960 to present date. See Bankruptcy and IVA chart 1960 to present date.

Q How do I go bankrupt?

You are either made bankrupt by a creditor or you do this yourself. See our section on the New bankruptcy online application / procedure

Q How do I get the bankruptcy forms, or do I need to apply online?

From 6 April 2016, residents of England and Wales seeking to make themselves bankrupt will no longer need to apply to the court. Instead they will complete an online application on GOV.UK, which will be submitted to an Adjudicator employed by The Insolvency Service.

Online applications will be less expensive and, for the first time, will be able to be paid for in instalments.You can read more on this here New bankruptcy online application / procedure

Q What alternatives are there other than bankruptcy?

An Individual Voluntary Arrangement (IVA). An IVA is a process of clearing your unsecured debts such as, credit and store cards, personal loans, payday loans, bank overdrafts and mortgage shortfall following a house repossession.

The IVA provider will help you work out what you can afford to pay each month. Once approved then all interest and charges will be stopped and you are protected from any legal action by your unsecured creditors.

If you decide that you do not wish to go bankrupt and according to your circumstances you may be able to propose an Individual Voluntary Arrangement (IVA).

We have more on IVAs here;

What is an IVA? IVA information IVA pros and cons

You may also be able to propose a debt management plan to your creditors.

If you live in Scotland then you may also be able to propose either a Scottish Trust Deed or a debt repayment plan under the Debt Arrangement Scheme

Q Where can I get help and advice to see if bankruptcy is right for me?

We can help you work out what is the best solution to your current debt problem.

It is important to remember that every instance must be decided upon its merits. What has proven to be right for one individual may not necessarily be correct for another. Age, working potential, assets and implications are all factors that need to be considered carefully before selecting bankruptcy.

Remember, it is not a crime to be in debt - always insist that you are treated with respect!

Need to ask a question about bankruptcy? If so then go to our debt help and IVA forum

The Insolvency Service - Guide to Bankruptcy

You can find more information from The Insolvency Service through their updated version (9th May 2016) Guide to Bankruptcy

 

 

 

 

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