Individual Bankruptcy

The option of Bankruptcy is for an individual who cannot pay his or her debts, as and when they fall due and there are 2 major considerations of the proceedings which are to:-

• Remove creditor pressure from the individual.
• Ensure a fair distribution of investment or property (assets) to those creditors.

A Court is officially responsible for issuing a bankruptcy order against an individual, although this is undertaken following the request of the individual or a creditor.

A trustee then takes charge of the assets and will be the Official Receiver or an IP whose task it is then to seek to find out all details of the debtors assets and liabilities and obtain the best possible result for creditors subject to a given criteria.

When the bankruptcy order is made creditors may no longer pursue for payment as payment is the responsibility of the appointed Trustee.

What is the Bankruptcy process?

A Court will not make a bankruptcy order until a bankruptcy petition has been presented and this is usually undertaken by:- 

• A Creditor petition (owed in excess of £750)
• A Debtor petition.

It is worth that an order for bankruptcy can still be made even if there is a refusal to agree to or even acknowledge that court order. Realistically full co-operation is required throughout the proceedings.

What is the cost of bankruptcy?

Three fees may require to be paid:-

• A deposit for administration fees that are relevant to the bankruptcy of £345.
• Court fee £150 but may be waived dependant upon an individuals circumstances.
• Fee when swearing the statement of affairs:- County Court makes no charge. High Court and solicitors charge is deemed appropriate.

Married couples seeking bankruptcy must pay separate fees.
Business partners pay separate fees other than a joint petition covered by The Insolvent Partnerships Order 1994 using a form 16.

Fees may be paid in cash, postal order, building society cheque, bank cheque or solicitor's cheque and made payable to H M Paymaster General. Personal cheques are not accepted.
Where a bankruptcy order is made.

A bankruptcy petition may be presented at the High Court in London or it may be presented at a County Court in the area where you live or trade.

A petition may be presented against you if you are not present in England or Wales at that time. If you normally reside in, or undertake business in connection with, England or Wales.

What happens at Court?

The Court may hear your petition quickly or otherwise arrange a time for the Court to consider it.
A Court may do one of four things at a hearing:-

If the court considers that more information is required it will stay the proceedings, this is a delay of the time scale required.
Suggest Administration over bankruptcy.
Make the bankruptcy order.
Issue a Certificate of Summary Administration if the unsecured debts are less than £20,000 and you have not been made bankrupt or entered into an IVA with your creditors at any time within the previous 5 years. Issue of this certificate speeds up the proceedings.

The Official Receiver is the Trustee in bankruptcy and you will automatically be discharged 2 years from the date of that bankruptcy order unless the Certificate of Summary Administration is not made in which case discharge from bankruptcy is normally twelve months from the date of the bankruptcy order

Dealing with bankruptcy cases

The Official Receiver, an officer of the court is a civil servant within the Insolvency Service and responsible for administering bankruptcies and acting as the Trustee of an estate unless an IP becomes appointed.

A major task is investigating financial affairs prior to and during bankruptcy.

An IP may be appointed as Trustee over the Official Receiver to dispose of assets and distribute payments to creditors. they must be licensed and are usually accountants or solicitors. The Insolvency Practitioner is then responsible for the disposing of your assets and making payments to your creditors.

Duties of a bankrupt

Once a bankruptcy order has been and within 21 days  the Official Receiver must be given information regarding financial detail including the listing of all of assets being:- property, pensions, insurance policies and others along with the amount of each debt and  which creditor they are applicable to.

You are required to produce any information required by the Trustee and attend the meetings.
The assets are then passed to the Official Receiver with bank statements and insurance policies relative to the property and financial affairs.

All assets and increases in income that are gained during the bankruptcy must be declared to the Trustee.

Bank and or Building Society accounts must no longer be used.

Direct payments are not  to be made to creditors.

You may be invited to attend Court and explain why you are in debt. Failure to co-operate often ends in arrest.

Disadvantages of bankruptcy

When declared bankrupt expect to: -

• See an advertisement in the London Gazette and local papers.
• Fill in many forms and have and meet with the Official Receiver and a Trustee in Bankruptcy to thoroughly investigate your affairs.
• If you have a business it will be ceased from trading and its employees dismissed right away.
• Surrender therefore lose assets of real value such as your home, life insurance and perhaps even pensions.
• Lose assets acquired during your bankruptcy period being:- inheritances, insurance settlements,  asset value growth in the family home.
• Building society or Landlord made aware immediately. 
• All bank accounts, credit cards will be closed. All goods on lease or hire purchase must be immediately returned to the owner.
•  Status is lost and many bankrupts face rejection and prejudice in their personal and business communities.

Bankruptcy of a business

The Insolvency Act 1989 “governs” the manner in which a company ceases to trade or recovers from serious debt and is fully explained under the section of Insolvency within services.