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Bankruptcy FAQ

  • What is bankruptcy

    Bankruptcy is a recognised method for individuals to deal with debts that they would otherwise be unable to repay. Bankruptcy releases a person from overwhelming debts and allows them to start again with a fresh slate. Anyone can go bankruptcy, including individual members of a partnership. If you are a company or a partnership business, then the insolvency procedures are slightly different. Declaring yourself bankrupt is not an easy decision and you should think very carefully before making the decision to move forward. We suggest you read through all of the information on this website then call us on 0800 5977 977 with more specific questions, which should enable you to make an informed decision
  • What are the advantages of going bankrupt

    Bankruptcy is often seen as the fastest and simplest way out of an unmanageable debt situation. Once an individual declares personal bankruptcy the majority of their debts are written off. There are some exceptions to this. Read our section on “What debts are written off” to make sure this is the case for you. Bankruptcy is not as stigmatised as it used to be. In most instances, bankrupt persons are not advertised in the local press any more unless it is in the public’s best interests. To find out what happens to your information, read our section on publicity. Property: If your home is in negative equity and you are considering bankruptcy, it is likely that you will be able to remain in the mortgaged property as long as you maintain mortgage and secured loan payments. You will need to confirm with the Official Receiver that you want to obtain the beneficial interest in the property. There is a simple and straightforward process involved with this and it is standard practice among Official Receivers. If you have significant equity in your home and you enter bankruptcy, your property might be at risk. However, the process is slow (it usually takes 12 months) and a number of options will be presented before the actual repossession procedure commences. Among these might be an agreement whereby a 3rd party purchases your share of the equity in the property. This is very common with properties that are jointly owned. R ead our section titled “Will I lose my home?”. Vehicles: In order to retain a vehicle in bankruptcy, you must be able to demonstrate that is a necessity. Usually, the vehicle would not have a value of more than £1000. In situations where a vehicle is owned and its value is significantly more than this figure, it could be sold and replaced with a cheaper vehicle. Read our section on “Will I lose my car?”. The most common household goods in your home are safeguarded during the bankruptcy process. Read our section on “Will bailiffs take my property?” Once declared officially bankrupt, an individual’s creditors must and are duty bound, to cease all actions as the debts are now expunged. This often comes as a tremendous relief to the majority of people as they begin to take control of their lives again. The main objective should always be to start again and adjust the lifestyle  so that the bankrupt person does not return to the same situation.
  • Is Bankruptcy right for me

    There is no easy answer to this question. Every individual is unique with differing circumstances. Therefore, to blanket a yes/no approach to this question would be a huge disservice. However, there is one statistic that cannot be ignored. All too often people who would benefit greatly from the protection of bankruptcy dismiss the idea out of hand, simply due to an inherent lack of knowledge. Their fear of the “stigma” of bankruptcy causes a kneejerk reaction that prevents them from making the right decision. Only 1 in 5 individuals who are in debt seek help and assistance with their problems. We are at a loss, on occasions, when we speak to people who let their fear of the stigma paralyze their ability to make a sensible decision. Do not fall victim to this. Read through all the information we have provided thoroughly, then call us on 0800 5977 977 with any other questions. Make a list of questions on paper, or even write down your fears, then speak to us about them. For most people with crippling debts, the choices they make at this point affect their entire future.
  • What Debts Are Written Off

    Most debts are written off in bankruptcy. However, there are some exceptions. Listed below are the debts that are excluded. Court fines, Debts due to the Child Support Agency (CSA) Student loan debts, State benefit overpayments (in some cases) and debts as a result of criminal activity
  • Is My Name Made Public

    Until April 2009, the name and address of anyone who had been declared bankrupt would have been published in the local paper. However, following the Insolvency Amendment Rules 2009 your name no longer appears in the local paper unless there are exceptional circumstances. The official receiver is only allowed to advertise names based upon the following rules. 1) When there has not been a full disclosure of relevant financial affairs. 2) Where there has been a high level of complaint or public concern in the local community. This means that unless you have been dishonest in your bankruptcy petition or are a business that has had complaints made against you, then your name simply cannot appear in the local paper. As with all insolvency solutions (such as an IVA), your name is placed on the insolvency register. This is available to anyone online. In bankruptcy your name is removed from the register 3 months after you are discharged.
  • Will I Lose My Home

    If you own a home, either solely or jointly, the interest in the property – mortgaged or otherwise – will form part of your bankruptcy estate. If your home is in negative equity and you are considering bankruptcy, it is extremely likely that you will be able to remain in the property provided you maintain mortgage / secured loan payments. The latest ruling is that the property’s value is to be reassessed after a period of 27 months – if there is still no equity at this stage, the Official Receiver will give up his interest in the property. Once this happens, the case cannot be revisited at a later date (if the market were to suddenly pick up again). If you have significant equity in your home and you enter bankruptcy, your property might be at risk. However, the process is slow (it usually takes 12 months) and a number of options will be presented before the actual repossession procedure commences. Among these might be an agreement whereby a 3rd party is allowed to purchase the Official Receiver’s interest in the property. We have known cases where a sale is not enforced regardless of the amount of equity in a property – the Trustee might simply place a charge against the property and allow the bankrupt to remain in the property.
  • How will my credit rating be affected

    If you have been experiencing financial difficulties, your credit rating may already be affected. By addressing your financial issues head on, you are taking the right step in improving your situation, and your future credit rating. Although at first you will find it difficult to gain credit, in time you will see an increase in your rating. Once you have been discharged, your credit file will show that you are a discharged bankrupt for 5 years. On a more encouraging note, many of our previous clients have been able to obtain credit as soon as 14 – 16 months after discharge.
  • What is the Bankruptcy process

    A Court makes a bankruptcy order only after a bankruptcy petition has been presented. As you would be petitioning your own bankruptcy you would have your court date booked by ourselves or organized into a ‘walk in’ court. You will be asked to give your petition (provided by us) to a bankruptcy clerk. Please be aware that the Bankruptcy court is not an open court, and you will not be asked to stand in front of a jury. In most cases, people do not even see a Judge for bankruptcy and even if you do, it will be in a private office.
  • Who deals with bankruptcy cases

    The Official Receiver is a civil servant and an officer of the Court. He is responsible for administering bankruptcies and will act as a Trustee of your estate unless a private sector Insolvency Practitioner is appointed. One of the Official Receiver’s main duties is to investigate your financial affairs for the time before and during your bankruptcy. An Insolvency Practitioner can be appointed Trustee instead of the Official Receiver. They must be licensed and are usually accountants or solicitors. The Insolvency Practitioner is then responsible for the disposing of your assets and making payments to your creditors.
  • What are the duties of a bankrupt

    When a bankruptcy order has been made, you must provide the Official Receiver with information relating to your financial affairs, such as a list of your assets (property, pensions, insurance policies, etc), outstanding amounts of each debt and to which creditor they are owed (the petition we have prepared for you.) Any assets are then to be handed over to the Official Receiver, along with any bank statements and details of any insurance policies relating to your property and financial affairs. Any assets and income increases obtained during the bankruptcy should be declared to the Trustee. You must not obtain credit of £500 or more from any person without first disclosing the fact that you are bankrupt. You must not make any direct payments to your creditors.
  • How long does Bankruptcy last

    A bankrupt may be discharged (freed from obligations under the bankruptcy order) in 12 months or less from the date of the bankruptcy order. Discharge releases the bankrupt from most of the debts owed at the date of the bankruptcy order. Exceptions include debts arising from fraud, certain crimes and fines. Certain other debts such as damages or personal injury or money owed under family proceedings (such as maintenance) will be released only if the Court agrees. The good news, however, is that in 99% of cases you will be debt free in one year or less.
  • Will I lose my Bank account

    Not usually in this day and age, unless you have debt with the bank in question. There are now several banks that have no problem at all with bankrupts, as these are. after all, the clients of the future – bankrupts have no debts! Call us on 0800 5977 977 to find out more.
  • If I am in an Individual Voluntary Arrangement, how do I come out of it

    Most IVA companies require at least 4 months of missed payments to terminate the contract they have with yourself and the creditors. An Insolvency Practitioner is likely to lose money if you leave the IVA so they will try to ‘re-sell’ you back on to the IVA. We will write to the IVA company on your behalf and sort this out for you.
  • Can Bailiffs come into my house

    The short answer to this is ‘No’, the bankruptcy procedure does not result in Bailiff activity – period. In the lead up to the bankruptcy, you may be under threat, particularly if you ignore County Court Judgements or have a Liability Order for non-payment of Council Tax against you. A Bailiff cannot enter your property unless you invite them in. Once you have invited them in or if they can gain unforced entry via an open door or window for example, they can return to court to obtain an order to enter with police and a locksmith. Try contacting the council or courts to set up a payment arrangement if you are really worried.
  • Will bankruptcy affect my address

    Bankruptcy will show up if someone credit checks against your name at the address you live at. However, other people at your address should not be affected by your bankruptcy, as the credit check is against the individual and not the address.
  • Will I have to pay any more money after I am Bankrupt

    This really does depend on your current income and expenditure. Most people entering bankruptcy have little choice in the matter as they have little money left at the end of the month. This is arguably the most important part of the service we offer,as it is imperative that you claim the legal allowable limit for all expenses. We have the latest limits and have an outstanding track record in helping people avoid having to pay anything after bankruptcy (known as an Income Payments Arrangement or IPA).
  • Does my employer have to know I have gone bankrupt

    Unless you are contractually obliged to inform your employer (check your contract) then you do not have to tell them. You may find that while you are bankrupt (up to one year in most cases) you will not pay tax and your pay slips will show ‘nil tax’ where your tax usually shows. Your tax is paid to the official receiver (they will advise you of how this will work) and they will pay it to your creditors. Do not panic, there are many reasons why ‘nil tax’ is awarded and your HR department would not be told of the reason it has been changed.
  • Will I lose my pension

    As of January 2015, pensions are 'ring-posted' in bankruptcy and do not form part of the bankruptcy, provided they are HMRC approved. There was a recent move by the Insolvency Service to force those approaching pensionable age i.e. 55 to draw down their pensions to settle part or all of the debt, but this was rejected by the High Court.
  • What assets will I lose

    If you have a vehicle, stocks, shares, premium bonds, property in positive equity, money in savings accounts, buy to let properties or any large amounts of cash, you will lose all or some of these in a bankruptcy. Please tell us if you have any of these. However, if your vehicle is worth less than £1,000 and you need it for work then you will be allowed to keep it.
  • Some of my debts have occurred through gambling

    In some cases, debts caused by gambling can lead to a bankruptcy restriction order. It is advisable to discuss this with us before proceeding.
  • Does my pension form part of my income

    Yes it does. Pensions are treated as 'earned income' and will be added to any part / full time employment in assessing whether you have surplus income. Although this will hardly effect most people, there are those receiving private monthly pensions in excess of £800 per month and this is treated in exactly the same way as if you had a salary of the same amount. People receiving state pensions only will not be affected. Call us if in doubt.
  • What is an Income Payments Agreement (IPA)

    An Income Payments Agreement (IPA) occurs when it is determined that you have surplus income after all of your expenses. The Official Receiver will place you in a 36 month IPA and this money will be used to cover the Insolvency Service's costs in administering the bankruptcy and to distribute among your creditors. As the name implies, it is an agreement and you have the right to negotiate, but if both parties cannot agree on a figure it will be taken before a Judge, who will arbitrate. This is a very good reason to seek professional assistance when completing your Income and Expenditure, as IPAs are often avoidable.
  • Can I include foreign debt in my bankruptcy

    Yes you can, but please note that EU debt and debt from countries, is treated differently. There are agreements in place among the EU member states that oblige each member to observe the other's creditors. What this means is that credit card debts, loans, overdrafts and mortgage shortfalls in say, Poland, will be liquidated in a UK bankruptcy. You may include debt from countries outside the EU, but they are not obliged to observe the bankruptcy and the debt may well remain in place. However, the creditors would not be able to pursue you for the debt provided you remained in the UK.
  • Will I keep my car

    The rule here is that vehicles up to the value of £1,000 may be kept provided they are needed for work. If you had a car worth, say, £3,000 you would be given the choice of either paying the OR the difference (£2,000) and keeping the car or allowing it to be sold and be given £1,000 (by the OR) to buy a replacement. It is unlikely that a car on finance will be allowed, though we have known exceptions.
  • Can I leave the UK after bankruptcy

    Yes you can and we have even had cases where the individual left for Australia the following day. The key to this being successful is providing a telephone number where you may be contacted by the Official Receiver. If the OR cannot locate you, the case will simply be suspended until such time as everything has been sorted out. If your case is complicated it might be best to postpone matters for a week or two, as the OR might wish to interview you.
  • Which bank will give me an account

    Provided you have no debt with a bank, most will allow this. However, both the Barclay's Cash Account and the Cooperative 'Cashminder' account have long been regarded as the safest options, though please note there are monthly admin fees associated with the latter.
  • Can I include Council Tax in my bankruptcy

    Yes you can, but if there is a Liability Order in place and Bailiffs have already set up a payment plan, you might have to honour this. Even the Insolvency Service is a bit hazy on this one as there is provision in the Statement of Affairs (form 6.28) to report any arrangements with Bailiffs. Let's just say that in 98% of cases you will get away with it, as once the letter from the Insolvency Service reaches the Bailiffs they tend to back off.
  • Does my tax code change

    For employed people there is a good chance that your tax code will change to NT (no tax) until the end of the current tax year. Your payroll dept. is advised of the code change but not given a reason and you will be paid gross of tax i.e. no tax taken, until further notice. You will be given instructions where to pay the amount you were paying towards tax. If your bankruptcy takes place around late February or March, there is a very good chance that this will not happen due to time constraints.