Bankruptcy

Bankruptcy is an option to be considered by anyone who is unable to pay their debt "as and when they fall due".

 Is Bankruptcy Right For You?

Since the change in the law regarding Bankruptcy, the percentage of people choosing the Bankruptcy option has risen dramatically. However, how many individuals who have petitioned for their own Bankruptcy knew that being made Bankrupt was not their only option? For those who did realise other options were available, how many still took the Bankruptcy route?

Incredibly, debtors are more likely to petition for their own bankruptcy rather than their creditors! You would think that most people who have been threatened with the prospect of being made Bankrupt would be riddled with fear of the possibility. It is more widely referred to as the “Big B” rather than the dreaded word itself. However, is this a thing of the past? Since the changes in The Enterprise Act 2002 took place in April 2004 it would appear a lot more people are inclined to petition for their own bankruptcy as a solution to their debt problems.

It appears that more people are choosing to go for Bankruptcy as they think that within one year of a Bankruptcy order being made, they could be debt free. Unfortunately, things might not be as simple as that and it would be wise to find out what options are available before taking the plunge.

In some circumstances, Bankruptcy IS the best option, but that is only SOME circumstances, not ALL. Even in Bankruptcy, you are still required to make payments from your income for up to three years, if you have a reasonable surplus. The Official Receiver (OR) also has the period of three years (not one year) to stake his claim on your residential home and if there is any equity in your property within that time period, the Official Receiver is likely to claim it.

In addition, Bankruptcy Restriction Orders (BROs) give the OR powers to extend bankruptcy restrictions for a further two to fifteen years if they consider that the individual has acted in a reckless or irresponsible way as far as their debt is concerned.

Considering Bankruptcy? What Should You Do?

For some people, Bankruptcy really is the only way out. There are numerous reasons why people find themselves in this situation. If you know you are unable to repay your creditors; you have no assets and there is no prospect of you making reasonable offers of repayment to your creditors, then petitioning for Bankruptcy could be right for you. Many people find themselves with this being their only option.

What Happens when a Petition is made?

Petition for Bankruptcy is made in one of two ways. Either you will make a petition yourself at a cost of £460, or your creditor will make a petition against you. If a creditor decides to make a petition for Bankruptcy, they would be responsible for showing that you either could not or would not repay the debt owed to them. Unless the petition was significantly disputed, it is likely that a Bankruptcy Order will be made.

Before the legislation changes in April 2004, if a Court believed that you could afford to make reasonable offers of repayments to your creditors, an Insolvency Practitioner would be appointed to look into your affairs and make a report to see if you were willing to make proposals to repay your debt. Your creditors would then be requested to consider your proposals. This has now changed…

If you make a petition for Bankruptcy, the Court will assume you have taken advice and you know you cannot repay your creditors. Therefore, a Bankruptcy order will be made. However, once the order has been made, it is still possible to have it reversed by making other arrangements.

You could try for a Individual Voluntary Arrangement (IVA). However, it is always best to consider this option before going to the expense and trouble of making a bankruptcy petition.

The cost

The cost to petition for your own bankruptcy is £460. However, the cost isn’t the only issue. The process leading up to making a petition and after the petition is made could prove to be very stressful.

So what should I do?

Before petitioning for your own bankruptcy, you should get an assessment of your financial situation. It is definitely advisable to get an assessment done before making a petition rather than an Official Receiver making the assessment after a Bankruptcy Order had been made. Debts Manager can offer you this assessment with no charge! Debts Manager will inform you of all options that are available and if there is a more suitable route than bankruptcy we will be able to advise you about this.

Click here for further information on bankruptcy.

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