UK Credit Problems - Bankruptcy

Anyone can be declared bankrupt. You are likely to be declared bankrupt if you have many debts that you really are not going to be able to repay.

• Presenting the petition
• The Official Receiver
• What you must do as a bankrupt
• What it will cost
• Declaring yourself bankrupt
• Your Credit Rating

Bankruptcy is declared to free you from unmanageable debts that you will never be able to repay. It should help you to legally make a fresh start prevent you sinking further into debt. The aim of Bankruptcy is to share out your remaining assets fairly and legally among your creditors, to help them recoup the debt you owe them.
If you should disagree with a predicted bankruptcy order you should try to come to some agreement with your creditors before a petition has been presented, otherwise it can be very expensive to fight the petition, it is in your own interest to cooperate. A Court will make the decision as to whether a bankruptcy order should be met after a bankruptcy petition has been presented and examined.

The petition is presented:

A – by yourself, this is called a debtors petition.
B – by one or more creditors, they have to be owed at least £750 by you. If this amount is unsecured they can present a bankruptcy petition against you in order to recoup at least some of the debt. This is called a creditor’s bankruptcypetition.

Bankruptcy petitions are presented at any county court near to where you live and a local Official Receiver will be appointed to deal with it. Even if you are not in the country at the time, a petition can still be bought against you. If you have had residential or business connections in England or Wales within the last 3 years then a bankruptcy petition can be brought against you.

The Official Receiver

The Offical Receiver is responsible for administering your bankruptcy and protecting your assets from the date of the bankruptcy order. The receiver will look into your financial affairs before and during bankruptcy, they will report to both the court and your creditors. They will look for any criminal or dishonest behaviour in connection with your bankruptcy.
The Official Receiver will act as trustee of your bankruptcy estate, unless an insolvency practitioner is appointed. An Insolvency Practitioner (an individual who specializes in insolvency work) can be appointed trustee instead of the Official Receiver. They must be authorized by either the Department of Trade and Industry or the appropriate professional body.

The Official Receiver will notify all organizations and related party's of the bankruptcy. Any person or organization who can provide any details of any assets or liabilities you have will be asked to do so. Utility suppliers, land registry, national savings, courts, bailiffs, banks, pension suppliers, landlords will all be asked for information which may affect the bankruptcy.

What you must do as a bankrupt:

- You will have to provide information about your financial affairs. You will have to fill out a questionnaire which will be very thorough, and you will probably be interviewed at the office of your official receiver.
- You will have to supply a list of all your assets and details of what you owe and to whom will be required from you.
- You will have to hand over all your books, records, bank statements, insurance policies and anything else relating to your financial affairs.
- Your Trustee should be made aware of any income or redundancy payments you incur or any property that becomes yours or inherit during your bankruptcy
- You will not be allowed to use such things as your bank, building society, credit card and similar accounts during bankruptcy.
- You will not be allowed to obtain credit of £500 or more from any person without first disclosing the fact that you are bankrupt.
- Before you make any payments to anyone whether diectly or indirectly you will have to consult your Trustee or Insolvency Practitioner.
You would be expected to pay any continuing commitments such as rent (if you rent your home), and any debts you incur after the bankruptcy.

What it will cost:

At a later date you may be asked to pay the courts fee, some courts will waver this, if for instance you are claiming income support or any benefit that makes it impossible for you to afford to pay.
You will have to pay a deposit towards the administering cost of the bankruptcy.
A married couple both applying for bankruptcy will have to pay separate fees, unless all parties have applied for a joint bankruptcy petition.

Declaring yourself bankrupt:

If you are in so much debt that you cannot find a way out of the situation then you may wish to declare yourself bankrupt. Firstly you will have to contact your local Court. They can give you the name, address and telephone number of the nearest County Court that deals with bankruptcy.
The Court will either hear your petition straight away or they may arrange a time for the Court to consider it.

At the hearing:
1 – The court may decide that further information is required before it can make any decision, and they may it Stay (delay) proceedings.
2 – The court may dismiss the petition and may decide an administration order would be more appropriate than a bankruptcy declaration.
3 – The court may decide to appoint an Insolvency Practitioner - the Court thinks that an Individual Voluntary Arrangement would be more appropriate. If you do not wish to enter into such an arrangement, you should inform the Court immediately.
4 – The court may agree and make a bankruptcy order. You will be declared bankrupt the moment the order is made by the Court.

If in the previous 5yrs your unsecured debts amount to less than £20,000, if you have not been bankrupt or made an Individual Voluntary Arrangement with your creditors, then the administration of your bankruptcy should be quick and simple. The court will issue a Certificate of Summary Administration. The official Receiver will be your Trustee. You will be freed or discharged from bankruptcy between one and two years from the date of bankruptcy order.
If the above conditions are not met a Certificate of Summary Administration will not be issued and your discharge from bankruptcy may take three years from the date of the bankruptcy order.

Bankruptcy and your Credit Rating

Any Bankruptcy is automatically registered with credit reference agencies and will remain on your file for six years. Even after this time you may have to declare your bankruptcy if applying for a mortgage. Having a bankruptcy order against your name can have an adverse effect on future finance, there is no way you can hide a bankruptcy order from any future creditor.

Once you have been declared bankrupt, only after 5 years can you apply to the court for a discharge from the bankruptcy order, it is entirely up to the court to decide whether or not a discharge is granted. Obviously it would help your case if since the bankruptcy you have not entered into any business or finance that has caused you problems. A good credit history since the bankruptcy orderwould work in your favour.