Bankruptcy
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Bankruptcy will often be the process that applies to someone who has simply over borrowed and whose monthly wage is insufficient to service those debts. However, if you are in business as a sole trader (or in partnership) a bankruptcy may be the appropriate route but will have added complications. Bankruptcy can only apply to an individual who is insolvent (i.e. the individual is unable to pay debts as they fall due or has insufficient assets to meet debts). An individual can either petition at Court for their own bankruptcy or wait for a creditor to do so. |
It is sometimes the right choice for someone to go bankrupt. However, it is important that you understand the other options available, including the feasibility of an IVA, and the consequences of bankruptcy before you go ahead and become bankrupt. We pride ourselves on giving impartial professional advice and taking the time to make sure you understand the implications of whichever solution you choose. So contact us to discuss your position, your options and the consequences of those options.
Surprisingly, there are some advantages to becoming bankrupt and they include:
- protection from creditors and the end of stressful phone calls;
- the prospect of a debt free fresh start;
- the possibility of continuing a business.
There is some "pain" associated with bankruptcy in the sense that your assets (subject to certain exceptions) will be taken from you and certain restrictions will be placed on you.
Frequently Asked Questions
| Who will know? | Your Bankruptcy will be advertised in a local paper and your creditors will be notified in writing. |
| Will it affect by employment? | Some professions will revoke or suspend qualifications on bankruptcy. In general there is no simple answer but we would be happy to advise on your individual position. |
| Can I have a bank account? | You will be able to operate a bank or building society account but will not be able to have an overdraft. |
| What will happen to my house? | This is a complicated area and there is no simple answer. However, if you have any equity in your home and become bankrupt that equity will belong to your creditors. Your trustee will normally work with you to release it but can revert to Court action if you do not co-operate. In any event, as long as you pay the mortgage, it is unlikely you will be "thrown out" in a hurry! |
| How long will it last? | In the case of a first Bankruptcy it will last for a maximum of twelve months but may be over as soon as six months from the order. |
| Can I continue my business? | Subject to certain legal and practical issues, for instance trading under your own name, you may be able to trade. |
| Can I continue to be a company director? | You cannot be a director of a limited company if you are an undischarged bankrupt. Please contact us urgently if this is a potential problem for you. |
| What will it cost to present my own petition? | The cost of a "Debtor's Petition" presented in the County Court is currently £485 (August 2007). |