Bankruptcy
Is bankruptcy right for me?
- Yes, if you have considered all the alternatives and decided you still have no realistic chance of clearing your debt.
- No, if you have not considered the other options for repaying your debts.
More and more people are considering bankruptcy as their preferred debt solution since the relaxation of the UK's bankruptcy laws through the 'Enterprise Act 2002'.
The most significant change introduced by the act was the term an individual is actually held bankrupt. The term was reduced from 36 months to 12 months for automatic discharges, with the Official Receiver retaining the ability to lengthen the bankruptcy term to upto 15 years in cases of financial recklessness or fraud.
As a consequence, bankruptcy is now seen to be a less punitive solution to people who have little or no assets to protect, or for people whose occupation would not be affected should they declare themselves bankrupt.
However, for those people wishing to protect a professional career such as an accountant, a lawyer, or a member of the armed forces, or those wanting to protect an asset, such as the equity in a property, then bankruptcy should still be considered an unsuitable debt solution.
You can petition for your own bankruptcy at your local county court. The cost for a personal bankruptcy petition in most cases is £485, which comprises £150 court fees and £335 official receivers fees, but these fees may be reduced if you are receiving means tested benefits.
There are some assets that are excluded from bankruptcy. Certain pension entitlements are protected, or excluded, as are personal possessions and items of clothing, household furniture and tools of a trade.
Other assets, which are not excluded, such as equity in a property, will be sold and the proceeds will be paid into your bankruptcy estate. The process of selling or liquidating your assets will be undertaken by the Insolvency Practitioner (I.P.) appointed as your 'Trustee in Bankruptcy', and any assets you may acquire during your bankruptcy term will become the property of the Trustee.
Your Trustee will assess your ability to afford payments to your creditors after your normal living costs have been taken into account. If it is concluded that you can make payments to your creditors, you will be required to do so for three years from the date of your bankruptcy. This is known as an Income Payments Order (I.P.O.), and even though you may have been discharged from your bankruptcy after 12 months, you will still have to continue paying your IPO for a further two years.
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