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What is Bankruptcy?

Bankruptcy is a form of insolvency that writes off debts if you can’t afford to repay them, giving you a fresh start. It’s a legal process that’s suitable if you can’t repay your debts in a reasonable amount of time.

Worried about Bankruptcy?

If you are worried about Bankruptcy, we’re here to help you! There are many people who will find themselves going bankrupt. Here at Business Helpline, we can discuss all of your options and help you plan for a better future.
Call our team today on 0800 088 2142.

How do I go Bankrupt?

Either you will make a petition to the court, or someone else will petition to make you bankrupt. If someone else has asked for you to be made bankrupt, you’ll be made aware of it by the court. If you don’t want to be made bankrupt you’ll need to prove that you don’t owe the person applying for money, or you’ll need to pay back any money you do owe them.

The first stages of the bankruptcy process are usually managed by an official receiver, who works for the Insolvency Service. They are normally your trustee unless an insolvency practitioner takes on that role. Your trustee explains the bankruptcy process to you and sells any goods or assets that you own which are not everyday household items or things needed to do your job.

What are the benefits Bankruptcy?

▪️Your unsecured debts will be written off completely

▪️Your creditors can’t take any further legal action against you or harass you to recover your debts

▪️They must also stop charging interest and adding other charges

▪️You won’t receive any further contact from your creditors

What are the risks of Bankruptcy?

▪️Assets such as your home or vehicle may be included in your bankruptcy

▪️Some jobs will be affected, such as legal or financial roles

▪️Bankruptcy will have a negative impact on your credit file and will appear on it for six years

▪️Your bankruptcy is recorded on a public register

What debts are not included in Bankruptcy?

▪️Magistrates court fines

▪️Any payments a court has ordered you to make under a confiscation order, for example, for drug trafficking

▪️Maintenance payments and child support payments, including any lump sum orders and costs that have arisen from family proceedings, although you may be able to ask the court to order that you don’t have to pay this debt

▪️Student loans from the Student Loans Company

▪️Secured loans and other secured debts

▪️Debts you owe because of the personal injury or death of another person, although you might be able to ask the court to order that you don’t have to pay this debt

▪️Social fund loans

What are the costs of Bankruptcy?

If you apply for your own bankruptcy, you’ll need to pay £680 to cover:

▪️£130 adjudicator fee

▪️£550 to the official receiver managing the bankruptcy.

You can pay in instalments, but you’ll need to pay the whole amount before you submit your bankruptcy application.

If your debts are below £20,000 you may qualify for a DRO (Debt Relief Order) which, with a one-off payment of only £90, will clear all your debts.  To see if you qualify try our Debt Relief Calculator.

What happens to your assets in Bankruptcy?

You can keep any items you need for your job, anything belonging to or exclusively used by a child (within reason), and everyday household items like furniture and clothing. If your household items are valuable they can be sold, but they will be replaced with a cheaper equivalent.

What steps do I take if my Bankruptcy is approved?

If your bankruptcy is approved, you’ll have an interview with the official receiver, either by telephone or in-person. You must attend this interview and co-operate with the official receiver for the bankruptcy to run as smoothly as possible. If you don’t, the bankruptcy may go on longer than the usual twelve months or you may have to attend court.

It helps to be prepared with the information the official receiver needs. You’ll need to tell them everything about your finances, including all debts, bank accounts, assets, and changes in income.

You will need whatever paperwork you have to prove what you’re telling them; the receiver will tell you exactly what paperwork you’ll need before the interview. You should also tell them if you need special help, if there’s anything that needs to be sorted out urgently, or you need more time to find paperwork for the meeting.

Can I go Bankrupt and keep my house?

If you do not have enough assets to pay your creditors without selling your house, it can be sold as a part of the bankruptcy procedure.

If you’re the sole owner of the property, the house will be sold and any money left after paying off the mortgage will be used to pay off your debts.

If you own the property jointly with someone else your share of the equity in the property will be used to pay off your share of the mortgage and any money left will be used to pay off your debts.

If you have a partner, spouse, or former spouse, or children living at the property, the trustee usually can’t sell the property without your permission for a year after the date of your bankruptcy. If after three years there’s less than £1000 equity remaining in the house then your house will not be sold and the ownership will not return to you. If more than £1000 equity remains after this time, the house may still be sold and a charging order will state the amount that will be taken from the sale towards repaying your debts.

You can stop the sale of your house if a family member or friend buys out the equity in your house.

Get in touch

If you are unsure whether refinancing this pathway will be right for you, don’t hesitate in contacting us.

Call one of our compassionate experts at 0800 088 2142.

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Bankruptcy FAQs

Can Bankruptcy be rejected?

It is unlikely that your bankruptcy will be rejected. However, there are some circumstances where this can happen.

To be made bankrupt, you must meet certain criteria. You must be unable to pay your debts, not currently in a Debt Relief Order and your centre of main interest must be in England or Wales (however there are certain circumstances where this does not have to be the case).

You can go bankrupt even if your payments are up to date. The fact you have paid them on time up until now does not mean that you are able to pay and keep up with your debts by yourself. It is likely the only way you have managed to do so is by borrowing more each month.

Can Bankruptcy affect my bank account?

It is unlikely that your bankruptcy will be rejected. However, there are some circumstances where this can happen.

To be made bankrupt, you must meet certain criteria. You must be unable to pay your debts, not currently in a Debt Relief Order and your centre of main interest must be in England or Wales (however there are certain circumstances where this does not have to be the case).

You can go bankrupt even if your payments are up to date. The fact you have paid them on time up until now does not mean that you are able to pay and keep up with your debts by yourself. It is likely the only way you have managed to do so is by borrowing more each month.

Can Bankruptcy take your pension?

It is unlikely that your bankruptcy will be rejected. However, there are some circumstances where this can happen.

To be made bankrupt, you must meet certain criteria. You must be unable to pay your debts, not currently in a Debt Relief Order and your centre of main interest must be in England or Wales (however there are certain circumstances where this does not have to be the case).

You can go bankrupt even if your payments are up to date. The fact you have paid them on time up until now does not mean that you are able to pay and keep up with your debts by yourself. It is likely the only way you have managed to do so is by borrowing more each month.

Will Bankruptcy affect my credit profile?

Your bankruptcy will stay on your credit report for six years, or until you’re discharged if this takes longer than six years. You will probably find it difficult to borrow money whilst bankrupt as lenders will do a background check on your credit profile. You are also obliged to tell lenders about your bankruptcy if you wish to borrow over £500.

If you do manage to find someone who will lend money to you, you might find that they will charge you a higher interest rate as you will be seen as a high-risk customer. Even when your bankruptcy has been cleared from your credit profile, lenders are still allowed to ask if you have ever been bankrupt.

Will Bankruptcy clear all my debts?

Majority of your debts will be covered by your bankruptcy. However, not all types of debt are included in bankruptcy. The people you owe these debts to can still take action towards you in order to get their money back. This means that before you apply for bankruptcy you should work out what steps you will try and take to deal with any debts that aren’t covered in your bankruptcy.

Will Bankruptcy stop bailiffs?

When you’re declared bankrupt, most types of creditor must stop taking any action against you and stop chasing you in order to get you to pay them. This means:

▪️they mustn’t do anything to try to get money from you, such as sending you letters or getting bailiffs and debt collectors to visit you, although they can still send you letters to tell you the balance of your account

▪️they must not start any new court action against you, unless they get permission from the court to do so

If the creditor is chasing you concerning a debt that wasn’t included in the bankruptcy then you will need to deal with paying them your debt.

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