Bankruptcy – What is it and how does bankruptcy work?
Bankruptcy is a way of dealing with debts where a court makes an order against you and you have been proven to be unable to repay the debts that you owe. The court may be a high court or a local county court.
A trustee is assigned to take over your financial affairs (this may be an official receiver or an Insolvency Practitioner) for a limited period of time. The trustee’s role is to ensure that any income you receive is used to pay of your creditor’s debts and money that you owe them.
In Scotland the term used for bankruptcy is sequestration
How can I make myself bankrupt?
Making yourself bankrupt may not always be the best solution to your debt problems. However, you can make yourself bankrupt by debtor’s petition by contacting your local court. You will be required to pay the court fees of £150.00 and a deposit fee of £360.00.
You can apply to make someone else bankrupt via a creditor’s petition if they owe you £750.00 or more at a local county court.
How does being bankrupt affect my credit rating?
If you are made bankrupt this may affect your chances of receiving credit again in the future. If opening a new bank account you must tell your bank that you have been made bankrupt and this may affect the type of account you will be able to use.
Any money you have in your account must also be made available and known to the trustee that is above and beyond any normal amount you will need to live on.
How long does bankruptcy last?
Bankruptcy lasts for a period of 1 year (12 months). After you have reached the end of the order you debts are then wiped clean. However, the effects of bankruptcy can be far reaching and may affect you chances of obtaining credit again in the future.
What’s an alternative to bankruptcy?
An alternative to bankruptcy may be an IVA (Individual Voluntary Arrangement) or a debt relief order if you are on low income or have debts of less than £15,000.
Please contact us for specific advice relating to your personal circumstances.
Best Wishes, Susan.
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