The definition of bankruptcy is an individual that cannot repay their debts. Usually the bankruptcy procedure begins with a petition being completed and served at the Court. It can be from either party; the debtor (the party that owes money) or the creditor (the party that is owed money). When the application goes to Court, all of the debtor’s assets are valued and scrutinised in fine detail. If the bankruptcy application is successful, the debtor is relieved of his debts.
This is the most common way in which an application for bankruptcy is served. The debtor may realise that making himself bankrupt is the easiest way to resolve his current financial situation. We advise that if a debtor is considering making themself bankrupt, that they have explored other avenues and that it should be used as a last resort. The debtor must owe at least £750 in order to make himself bankrupt. A Statement of Affairs and Petition must be served at a Court that deals with bankruptcy. Although we can complete these forms on the debtor’s behalf, the debtor will have to visit the Court in person in order to sign the documents. There are fees payable to petition bankruptcy.
If a debtor makes themselves bankrupt, they cannot:
- Borrow more than £500 without informing the lender they are bankrupt
- Act as a director of a company
- Create, manage or promote a company without the Court’s permission
- Manage a business under a different name without informing traders that you are bankrupt
- Work as an insolvency practitioner.
If you do commit any of the above acts, it can be seen as a criminal offence. The likelihood is that the bankruptcy discharge can be extended further than the standard 1 year.
If a debtor declares themselves bankrupt, or are made bankrupt by creditors then the debtor’s assets will be sold to pay the bankruptcy debts. There are certain items the debtor can keep which include tools of trade and household items such as bedding and clothing.
Within 2 weeks of the Court making your bankrupt, an Official Receiver will contact the debtor to arrange an interview. This interview will include going through all of the debtor’s assets in more detail to assess whether they can be sold to pay off the outstanding debt. Unfortunately the Court can demand that the debtor’s house is sold if this is the only way to pay the debt. This may not be the case if there is another person named on the title deeds.
However, this does not mean that the home won’t be sold, more that the selling of the home will be delayed. It may well be that you have to pay a certain amount per month from your wage. The Official Receiver will inform you if this is the case and an Income Payments Arrangement will be arranged. The amount you pay will depend on how much the debtor can afford after essential payments have been made.
The bankruptcy and restrictions generally end when the bankruptcy is discharged. This is usually 12 months from when the Court made the debtor bankrupt. However, the period can be extended depending on the behaviour of the debtor.
A creditor that is owed money from an individual can make a petition for a bankruptcy order. This can be done when the debtor owes more than £750 and cannot realistically pay their debts.
Specialist advice about Bankruptcy matters
Hello, I am Adam Cresswell and I am the Head of Seatons Solicitors Civil Litigation Department.
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