IVA (Individual Voluntary Arrangement) to Bankruptcy - Questions & Answers

How long will bankruptcy last?
The statutory maximum period for a bankruptcy is 12 months. However, at the Official Receiver’s discretion, you may be released after a few months. This might typically happen when it is unlikely that an individual’s circumstances will change. The Official Receiver’s job is to secure payments for the creditors, but in cases where there is no prospect of this, he would rather close your case file and move on.

What happens when I go to court?
We prepare and send your completed bankruptcy petition to you. You will need to take this to court together with all the relevant documents that confirm your IVA has failed. You will receive this from your IVA provider. Sometimes it happens that the IVA provider fails to provide this information which can prevent the bankruptcy order from being granted. If this is the case then the bankruptcy date is adjourned and the court will write to the IVA provider requesting information and confirmation that the IVA has failed, giving them a time line to return the information. This means that the IVA provider will either provide the information or not. If they don’t them the court will take a dim view on this process and will often just grant the bankruptcy order at the next hearing. We book the court date for you. This is often within a 4 week time frame and will be agreed with you to ensure your availability is concerned. Because we have prepared the paperwork in the format that we know the court requires, there is often no need for you to see a District Judge – this may vary from Court to Court but in most cases it is unnecessary. You will probably be asked to return to the Court in two hours to collect the Bankruptcy Order. The Order will, in these circumstances, have been automatically granted in your absence unless there are complications with your application. We are pleased to say that we currently have an excellent success rate with the Petitions prepared by us and so problems are extremely unlikely to occur as long as you have given us full disclosure and completed all the paperwork accurately. In fact, we have been commended by Judges and Courts for the quality of our work. You will also need to take the bankruptcy fee with you to Court in cash – this is payable to the Court, not to us, and they will only accept a cash payment.

What effect will Bankruptcy have on me?
You are immediately free from debt and will not be responsible for any of your pre-existing debts. It is a fresh start for you and your family to start again and build yourself up to a position of strength. You are immediately protected from all of those creditors who formed part of your bankruptcy. The restrictions that you are placed under for the duration of your Bankruptcy Order are simply that you are unable to act as a company Director until your discharge and if you borrow a sum of money greater than £500, you are obliged to disclose your Bankruptcy status to the lender. You should understand that it is extremely unlikely that you will be able to borrow money from a High Street lender. It is not unusual for a self-employed person to obtain start up or project funding from a private source which is acceptable for an un-discharged Bankrupt (provided the lender is aware of your circumstances).

What will happen when I cancel my IVA payments?
You will be contacted by your IVA Company and there is a good chance that they will try very hard to get you to change your mind. They may offer to take you through bankruptcy for nothing, sometimes by threatening legal action, and occasionally by trying to frighten you about bankruptcy. The facts about bankruptcy are simple. If you are in any doubt at all then please contact us, and we will talk through the issues through with you. You need to understand that there has been a significant shift in the way bankruptcy is perceived. For example, whereas a year ago it was not possible to have a bank account post bankruptcy, there are now several banks offering banking facilities, including chip and pin cards, direct debit facilities, etc.
An IVA company could stand to lose £5000 plus in lost fees if they lose you as a client, and it may seek to protect against this loss by trying to persuade you to remain with them. You must remember that you must do what is right for you and not what is best for your IVA provider.

May I still go bankrupt even though I’m in a contract with my IVA?
Yes you can. You are entitled by law to cancel your IVA at any time you wish and once cancelled, you can go bankrupt. We are on hand to provide you with assistance with any problems that occur in respect of your financial affairs. There is a process to follow and our advisors will assist you with this. Very importantly it depends on where you are in the country as the county courts procedure varies considerably. Sometimes they need to receive a notice of breach and sometimes they are not concerned about this and will allow you to apply for bankruptcy providing you have the completed petition and the court fees.

Can I have a bank account when I’m bankrupt?
Yes you can. It is now possible to open an account with both Barclays and Cooperative Bank (including chip and pin / direct debit facilities), while other banks are becoming increasingly tolerant. We also recommend a pre-paid MasterCard for you if you prefer. There are plenty of facilities available for people in bankruptcy and again we can offer you guidance and support with this

Will Bailiffs come round when I enter into Bankruptcy?
No. Bailiffs are no longer allowed to remove furniture and personal effects when you enter into bankruptcy, although this was the case pre-2004. Both bailiffs and creditors will be advised of your bankruptcy but it does take a certain amount of time for them to receive this information. Once you show them the Bankruptcy Order or advise your creditors of the Bankruptcy Order Number over the telephone, they must back off immediately. If for any reason you do receive a visit from a bailiff all you need to do is show them your bankruptcy order or confirm to them that the order has been granted. They have a duty to leave you alone, and if they persist then they are in breach of their official guidelines which is a criminal offence.

Will I be ordered to pay any money to the Court on a monthly basis under an Income Payment Agreement?
Not necessarily. This all depends on your level of disposable income after all of your legitimate living expenses are taken into account. This is often considered the main value for using our services. Statistics show that 83% of people who attempt self-bankruptcy end up paying an Income Payment Agreement for 36 months. The reason for this is that they are unaware of the full range and limits of the allowable expenses. Our staff who complete the documentation for you are experienced and know the legislation and all expenses that you can legitimately include from your own circumstances therefore reducing the likelihood of an Income Payment Agreement or, if one is imposed upon you we will still be there to assess your situation and advise you to ensure that its fair and reasonable depending on your circumstances.

Will bankruptcy affect my address?
No. Neither property nor individuals i.e. other household members, are effected by your personal bankruptcy. Their rights are protected under the Data Protection Act 1998

What happens after I make my first payment?
We consider you a client immediately we receive the signed authorities, enabling us to represent you when dealing with your creditors. Once you have made your first payment, we release a second pack which requires the type of information needed to produce the Statement of Affairs or Bankruptcy Petition. Regardless of whether you have made a payment or not, once the Legal Authority has been received, we can act on your behalf when it comes to dealing with creditors. In some instances – particularly when it comes to pressure from bailiffs - we can assist in obtaining an Interim Order which will prevent further action.

What do we need returned from the customer services pack?
You need to sign and return: 1. Your 3rd party letter of authority 2.Your legal authority to act 3) Your regular standing order form 4). Please complete and return the questionnaire which can be done on line by visiting www.bankruptcy.co.uk

What happens if creditors or my IVA company call me?
Tell them the truth. You have been in an IVA that has not worked out for you and that you are in the process of petitioning for bankruptcy and advise them that you have taken on our services to assist you. Give the creditor our details, your reference number and our telephone number and that’s it. Once you have done this, it’s best to ignore further calls or ask anyone who contacts you to refer to us as we are dealing with your financial affairs on your behalf. Let us deal with the situation. As far as correspondence from creditors is concerned, simply send us everything and we will write to them, explaining your status.

Can I go to prison for cancelling my IVA?
No. We are aware that certain IVA companies are telling their clients that if they default they may go to prison. It is completely untrue. We are aware that some individuals have been told this and we are looking into the matter. It is entirely your decision as to whether or not you remain in an IVA and you need to make an informed decision depending on your own financial and personal circumstances.