Answers to Questions about Bankruptcy

 

What does it cost to go bankrupt?

To file your own petition you will have to pay the Official Receiver’s a deposit of £345. There is also a court fee which is usually waived, depending on personal circumstances.

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Is my home at risk?

Put simply, a bankrupt’s interest in the home is an asset which is caught by bankruptcy and therefore, goes into the bankruptcy estate. The interest of any joint owner is not caught by bankruptcy. A trustee can go court to get a possession order to evict the bankrupt and spouse so that the property can be sold.

There are various issues involved in determining how much the interest of the joint owner is worth. These can be complicated and will depend on the precise circumstances in every case. In the event of a dispute, the interests will have to be determined. This can happen by negotiation and agreement, possibly through mediation or in the final analysis by the court.

This is a very important and, of course, touchy subject. If you or perhaps your spouse or other joint owner wish to know more, contact us via the telephone advice line. It goes without saying that it is sensible to know how you may stand before going bankrupt. If possible, this is the time to make contact with us.

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Are there any alternatives to bankruptcy?

The alternatives depend on the amount owed. If you owe less than £15000, have no business debts and have no assets, you can make an application under the Tribunals, Courts and Enforcement Act 2007 for an administration order subject to conditions or a Debt Relief Order. A Debt Relief Order is handled by the Insolvency Service.

The other main alternative is the Individual Voluntary Arrangement [IVA]. This has become very popular over recent years but has many snares and great care should be taken if you are considering going down this route. It can certainly work out much more expensive in the long run than going bankrupt although, ironically an IVA can make a good exit route back out of bankruptcy! In such circumstances, the debtor is in a rather stronger position.

You can see a detailed paper on IVAs by Adrian Leopard & Co by going to the Client Area and downloading it from there. You can also look at our IVA data and if you want more information or you would like to discuss this with an unbiased party, call us via our Telephone Advice Line.

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I have heard that IVA is the perfect solution. Is it?

The main alternative to bankruptcy is the IVA. This has become very popular over recent years but has many snares and great care should be taken if you are considering going down this route. It can certainly work out much more expensive in the long run than going bankrupt although, ironically an IVA can make a good exit route back out of bankruptcy! In such circumstances the debtor is in a rather stronger position.

Like any other procedure it is going to depend entirely on your own personal circumstances and what you in fact wish to achieve. Only by taking advice can you determine whether this is the perfect solution for you.

You can see a detailed paper on IVAs by Adrian Leopard & Co by going to the Client Area and downloading it from there. You can also look at our IVA data and if you want more information or you would like to discuss this with an unbiased party, call us via our Telephone Advice Line.

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How does an IVA work and how long does it go on for?

An Individual Voluntary Arrangement [IVA] is in essence a contract between an insolvent debtor and his creditors.

You can see a detailed paper on IVAs by Adrian Leopard & Co by going to the Client Area and downloading it from there; this will provide answers to many of your questions. You can also look at our IVA data and if you want more information or you would like to discuss this with an unbiased party, call us via our Telephone Advice Line.

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How long will I be bankrupt for?

Under present law a bankrupt will get an automatic discharge one year after the making of the bankruptcy order. This can in some circumstances be shorter but the Official Receiver or trustee in bankruptcy can apply to the court for the suspension of the running of the bankruptcy discharge period for cause shown, usually a failure to co-operate.

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How do I go bankrupt?

A creditor can make you bankrupt by applying to the court for a bankruptcy order.

If you want to make yourself bankrupt you go to your local county court with bankruptcy jurisdiction and tell them you wish to file your petition in bankruptcy. The court staff will tell you what to do from there. On completion of the forms, they hand you to a district judge who will usually make the bankruptcy order immediately although the court can direct that an insolvency practitioner be instructed to consider whether an individual voluntary arrangement is appropriate in the circumstances.

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Will I lose my household possessions?

Section 283(2)(b) provides that clothing, bedding, furniture, household equipment and provisions as are necessary for satisfying the basic domestic needs of the bankrupt and his family, do not form property of the bankruptcy estate and accordingly, may be retained by the bankrupt

Property over and above basic domestic needs, therefore, is caught by the bankruptcy. There is no statutory definition but, as an example, the van Gogh on the wall would be unlikely to be regarded as fitting into that definition.

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Will I lose my car?

Section 283(2)(a) Insolvency Act 1986 provides that vehicles as are necessary to the bankrupt for use personally by him in his employment, business or vocation do not form property of the bankruptcy estate and accordingly may be retained by the bankrupt

This is the statutory provision but there is a lot of misunderstanding about it. It does not mean “I have a car and I need it generally so I can keep it?”

If you have any doubt as to your position, you need to take advice because it can be a great shock when the vehicle you thought you could keep is taken away. There are ways of protecting yourself but these would need to be planned and entered into prior to bankruptcy.

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Will I lose the tools of my trade?

Section 283(2)(a) Insolvency Act 1986 provides that such tools, books and other items of equipment [and vehicles but see the separate response about this] as are necessary to the bankrupt for use personally by him in his employment, business or vocation do not form property of the bankruptcy estate and accordingly, may be retained by the bankrupt.

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Will I have to make payments to my trustee in bankruptcy?

You may. Section 310 Insolvency Act 1986 provides that the court may make an income payments order for a bankrupt to pay surplus income to his bankruptcy estate.

Section 311 Insolvency Act 1986 provides for an income payments agreement to be entered into between the bankrupt or a third person and the trustee in bankruptcy.

There are rules about how these payments are calculated and of course they depend entirely on the personal circumstances of the bankrupt and, to some extent, his family.

If you have any doubt as to your position you need to take advice because you may think this will not apply to you.

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Can I have a bank account if I am bankrupt?

You may. There is no restriction on having a bank account but the trick is finding a bank which will give you one. There are a few who are prepared to deal with bankrupts.

However, you can make some preparations in this respect prior to bankruptcy. After the event it is too late. If this is of interest, it is something we can discuss over our Telephone Advice Line.

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What are the restrictions imposed on a bankrupt?

The Insolvency Service web site states the following:

Disabilities imposed on Bankrupts by Insolvency and other legislation 
Disabilities/Restrictions Imposed by Insolvency Law 

Once a Bankruptcy Order has been made against an individual he will be subject to the following restrictions under the Insolvency Act 1986 and the Company Directors Disqualification Act 1986 (CDDA):

  1. Prohibited from acting as a director of a company, or to directly or indirectly take part in or be concerned in the promotion, formation or management of a company.
  2. Prohibited from obtaining credit over £250 without disclosing his status.
  3. Prohibited from using a trading style other than the name in which he was adjudged bankrupt, unless he discloses the name under which he was adjudged bankrupt.
  4. Prohibited from acting as a receiver or manager of a company’s property on behalf of a debenture holder (England & Wales).
  5. Prohibited from acting as a receiver (Scotland).
  6. Disqualified from acting as an insolvency practitioner.
  7. Disqualified from sitting or voting in the House of Lords.
  8. Disqualified from being elected to, or sitting or voting in, the House of Commons.
  9. Prohibited from sitting or voting in a committee of either House.

A bankrupt who, without leave of the court, acts as a company director or who is concerned in the promotion, formation or management of a company commits an offence. On conviction he is liable to face, on indictment, a term of imprisonment not exceeding two years and/or a fine or both, and, if tried by a Magistrates Court, a term of imprisonment not exceeding six months or a fine not exceeding the statutory maximum. The same penalties apply to bankrupts who act as receiver or manager (England & Wales), as a receiver (Scotland) or who obtain creditor or engage in business without disclosing their status/the name under which they were adjudged bankrupt. 

Other Restrictions 

In addition to the prohibitions contained in the Insolvency Act 1986, a bankrupt is disqualified from holding certain positions/offices as a result of restrictions contained in other, legislation, the most notable of which are: 
 

  1. Disqualified from acting as a local government councillor
  2. Disqualified from being the trustee of any trust scheme
  3. Disqualified from acting trustee of a charity (unless the Court grants leave)
  4. On the making of a Bankruptcy Order a solicitor’s practising certificate will be suspended (suspension may be lifted on application to the Law Society)
  5. Disqualified from engaging in estate agency work (except as an employee)
  6. Disqualified from holding office as a school governor
  7. Disqualified from being appointed or acting as a justice of the peace
  8. Not permitted to be a member of any local rating valuation panel

  
This list is not exhaustive and there are more obscure provisions. For example, a bankrupt may not be a member of a regional local land drainage committee. 

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What is a bankruptcy restriction order?

A bankruptcy restriction order is an order of the court made on the application of the Secretary of State or the Official Receiver.

The disabilities are very similar to those of an undischarged bankrupt.

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Can I give my assets to my family and friends and then go bankrupt?

Gifts and transactions at undervalue can be set aside under section 339 Insolvency Act 1986 and can be backdated up to five years, in some cases even longer. However, there are circumstances when that section may not apply.

These transactions are potentially very complicated and will depend on the circumstances of the case. If you think you may have a problem in relation to something of this nature you will need to take advice. Try our Telephone Advice Line.

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How will my spouse be affected by my bankruptcy?

It is a fact that a spouse and other family members will be affected by a bankruptcy. However the extent of the effect will differ in every case. We can discuss this with you over the Telephone Advice Line if you would like to learn more.

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