Bankruptcy is an option that is available when an individual cannot pay their debts as they become due.  A first time bankrupt with debts will generally receive their discharge one year after the date of the bankruptcy order. Bankruptcy carries a bad stigma and is publicly advertised and it is recommended that alternative solutions should be considered.  The bankruptcy proceedings free you from overwhelming debts so you can make a fresh start, subject to some restrictions and makes sure your assets are shared out fairly among your creditors.

Anyone can go bankrupt, including individual members of a partnership but there are different insolvency procedures for dealing with companies and for partnerships themselves.

An individual can be made bankrupt either by themselves, or involuntarily (by the creditor owed more than £750). A bankruptcy order can still be made even if you refuse to acknowledge the proceedings or refuse to agree to them. You should therefore co-operate fully once the bankruptcy proceedings have begun. If you dispute the creditor’s claim, you should try and reach a settlement before the bankruptcy petition is due to be heard. Trying to do so after the bankruptcy order is made is both difficult and expensive.

The disadvantages of bankruptcy are:

• The cost of making an application for bankruptcy is £450 (£140 court fee and a £310 deposit fee).
• Your credit is affected for many years after the annulment
• You cannot obtain credit for over £500 without telling the lender that you are bankrupt
• Your situation is advertised in the local press
• You will be required to fill in numerous forms and have an extended meeting with the Official Receiver, and, if appointed, a Trustee in Bankruptcy who will thoroughly investigate your affairs.
• Any business you own immediately closed and any employees dismissed.
• The Official Receiver can sell any of your assets, this includes your family home, your car and any of your household effects (if they are deemed to be of excessive value).
• You will lose any assets of real value including your home, life insurance and possibly pensions
• You will lose any assets you may acquire during the term of your bankruptcy such as inheritances, insurance settlements, and growth of asset value in your home.
• Your building society, creditors, landlord etc immediately informed.
• All bank accounts, credit cards etc will be closed. Anything you might be leasing, or buying on hire purchase, such as your car will be immediately returned to the owner.
• Professional and business status will be lost, and future employment opportunities may be prejudiced with possible rejection from many associations and societies.
• You cannot act as a company director or take any part in the promotion, formation or management of a limited company (LTD) without the permission of the court.
• You cannot trade in any business under any other name unless you inform all persons concerned of the bankruptcy.
• You may not practice as a Charted Accountant / Lawyer, act as a Justice of the peace (JP), become a Member of Parliament or become a member of the local authority.
• You may be publicly examined in court.
• You will be obliged to declare you are an undischarged bankrupt if you apply for credit in excess of £500.
• Certain occupations and professions, such as the Police Force, Armed Forces, Local Council and Government Offices. Many corporate employers carry out background searches - this could also mean that promotion prospects could be affected.
• Any member of your family or even your employer, could be publicly examined in court if the Official Receiver believes this will aid the investigation.

The advantages of bankruptcy are:

• For the person involved, bankruptcy provides relative peace of mind as once a debtor has been discharged from bankruptcy they are no longer liable for any outstanding debts as long as they were detailed in the bankruptcy proceedings. This provides a fresh start for those unable to clear their outstanding debts within a reasonable timescale.
• For the creditors, bankruptcy allows a full investigation of the debtor’s affairs to be carried out.

Complete our application form now and see how EuroDebt can help you avoid bankruptcy and find an alternative solution to getting your finances in order.

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