Bankruptcy

Bankruptcy

In This Section..

• What is bankruptcy?
• How can I bring about my own bankruptcy?
• What are the advantages of bankruptcy?
• What are the disadvantages of bankruptcy?
• Can creditors make me bankrupt?

Bankruptcy help is available from Moneysolve.   We can help your client
to avoid bankruptcy or we can support your client through the process of bankruptcy.

BANKRUPTCY

Bankruptcy is a formal insolvency procedure used where someone’s financial affairs are such that they owe a lot more money than the value of their assets. 

Bankruptcy can come about either by a creditor who is owed more than £750 making a creditors’ application to the court or the debtor making their own application.   Either way once a bankruptcy order is made your client’s affairs would be dealt with by the Official Receiver or an appointed Trustee in Bankruptcy.   Any assets that your client owns at the time of their bankruptcy will vest in their Official receiver or their Trustee in Bankruptcy and consequently if you own your own home the Trustee would seek to realise any value that you have in it if necessary by applying to the courts for your house to be repossessed and sold. 

The Trustee in Bankruptcy would also seek to sell any investments or shares and will also take control of any savings accounts that your client may have.   If your client receives any assets during their bankruptcy such as a lottery win or an inheritance this will have to be paid to your Trustee in Bankruptcy and such sum would be distributed to your creditors.   In addition having taken into account your income and expenditure the Trustee in Bankruptcy may try to reach agreement with you as to the level of a monthly payment for an income payments agreement.   In the event of him not being able to agree a suitable level of income payment, he will seek to make an application to the court.   Such payments usually last for 36 months from the date of any order and unless the court determines otherwise. 

The Trustee in Bankruptcy is now required to investigate your conduct and the circumstances giving rise to your present financial predicament.   Relevant conduct can include such matters as borrowing money from creditors when you knew your client had no way of repaying it, giving assets away or selling them for less than their value, paying some creditors (usually family members) before others, gambling or fraud.

Such conduct could give rise to grounds for the client’s Trustee in Bankruptcy to make an application to the court for a Bankruptcy Restriction Order.   The effect of this would be for the duration of your bankruptcy to be extended for a period of up to 15 years.  This depends very much on the conduct in question.

Advantages of Bankruptcy

• It gives your client an opportunity for a fresh start.   It prevents his/her creditors making any further claims against him/her or demands for direct repayment of the debts whilst they are bankrupt and cannot pursue them for repayment once he/she has been discharged from bankruptcy.
• Relative peace of mind.  All legal action against your client is stopped in relation to the bankruptcy debts.
• The level of an income payments order may be lower than those required in a voluntary arrangement and unless the Trustee in Bankruptcy applies to the court for a bankruptcy restriction order would only last for 36 months.

Disadvantages of Bankruptcy

• If your client is to apply for their own bankruptcy they would be required to pay a substantial court fee.  At the present time the cost for a petition is £450.
• If your client applies to obtain credit of more than £500 during their bankruptcy and prior to discharge they must bring this to the lender’s attention.
• Any assets that they own at the time of their bankruptcy will automatically transfer to your client’s Trustee in Bankruptcy.
• Your client has a duty to provide full information as to their assets and liabilities, income and expenditure and fully co-operate with the Trustee in Bankruptcy.   Failure to co-operate may result in the Trustee in Bankruptcy applying to the court to suspend time running n respect of the duration of your bankruptcy and extending its duration.
• The Trustee may make an application to the court for your client to be subject to an income payments order and may require monthly repayments for a period of 36 months (unless the court orders a longer period).
• You would be automatically disqualified as acting as a director of a limited company or taking part in the management of a company except with the court’s permission.   You may also be prejudiced in your employment if you work in the financial services industry, police or other related areas or perform a management role.
• Certain debts are not provable in bankruptcy eg student loans, arrears of maintenance, fines and child support agency payments.  These will need to be paid even if your client is made bankrupt.
• As the Official receiver has to investigate the circumstances giving rise to your client’s financial predicament if this has been the result of reckless, blameworthy or dishonest conduct, the Official Receiver/Trustee in Bankruptcy appointed by him may apply to the court for a Bankruptcy Restriction Order eg building up credit card debt that your client realistically could not pay back.
• Certain conduct in bankruptcy may result in prosecution and can be punishable by imprisonment of a maximum of two years for example defrauding creditors, concealing assets or destroying books and  records.
• Bankruptcy orders are advertised in the London Gazette, Local newspaper and it may be difficult for your client to operate a bank account during bankruptcy.
  

How can I bring about my own bankruptcy?

• We can assist your client in applying for their own bankruptcy.   The procedure involves you completing a set of forms, making an appointment at the local county court where your client’s bankruptcy application can be presented to the court.
• Once consideration has been given to your client’s application by the court clerk, an Order is made and the Official Receiver is appointed in the first instance to manage your client’s financial affairs and to take over negotiations with your creditors.
• The Official Receiver may appoint a Trustee in Bankruptcy to take over the management of the bankruptcy.   This usually happened when there are assets, which can be recovered for the benefit of your client’s creditors.

Moneysolve can explain all about bankruptcy to your client

Can creditors make me bankrupt?

• Creditors can apply to the court for a bankruptcy order to be made against your client.
• This is a totally separate procedure to that of your client applying for their own bankruptcy.
• Creditors are usually likely to take this step if your clients have assets which the creditors can require to be sold to repay the outstanding debt or where by the issuing of the petition the creditors feel that they can improve their prospect of receiving payment in full for the outstanding amount.
• The procedure for this is that the creditors usually have to apply to the court for a judgement.   Then the creditor will instruct enquiry agents to arrange for service of a statutory demand.   This is the start of the process.   You then have 19 days in which to make an application to the court for the statutory demand to be set aside.   If this time lapses and no application is made then in those circumstances a bankruptcy petition can be presented at any time thereafter.   If a bankruptcy petition has been presented please contact us for advice on how to defend it or if other avenues are available to you.

Moneysolve can help your client avoid bankruptcy