Is there any preparation for going bankrupt?
If you are going bankrupt, then there are steps that you can take to make the process more comfortable for you. I have detailed some pointers and considerations in a guide. Go to the preparing bankruptcy guide for more information.
How will going bankrupt help you?
Going bankrupt will help you wipe the debts that you are unable to repay. People often associate a fresh start with bankruptcy, but this is not strictly true. It is a fresh start, subject to the consequences that come with bankruptcy. It is essential to realise this.
By going bankrupt, you will be able to wipe out the majority of your debts. You also gain an element of legal protection as most of your creditors will not be able to proceed with any enforcement action against you without permission from the court. Please note the word majority here. It is essential to realise that not all debts can be wiped out through bankruptcy. Similarly, some of your creditors can still take steps to recover their debts.
Who can go bankrupt, and what will happen?
A common misconception is that companies go bankrupt. That is not true. In the UK, bankruptcy only applies to individuals. Any individual can go bankrupt, but you will need to meet the grounds to be able to petition. Luckily, there is only one: you cannot repay your debts. You must owe more than £750.
When you go bankrupt, you will be subject to bankruptcy restrictions and suffer from other implications. The Official Receiver will also investigate you unless deemed unnecessary, though it is rare not to be. All of your assets that are not exempt from the bankruptcy estate will come under the control of the trustee. They may have to be sold.
What restrictions will apply once I go bankrupt?
From the date that you go bankrupt, you will be subject to bankruptcy restrictions, which mean you cannot:
- Get £500 or more of credit either alone or jointly with any other person without informing the lender of your bankruptcy
- Carry on business (directly or indirectly) in a different name from that in which you were made bankrupt without telling all those with whom you do business the name in which you were made bankrupt.
- Be concerned (directly or indirectly) in promoting, forming or managing a limited company or acting as a company director without the court’s permission, whether formally appointed as a director or not.
It is an offence to breach the bankruptcy restrictions.
These restrictions will most likely affect you if you run a business or intend to run a business after bankruptcy.
It is important to remember that there will be an investigation into your affairs. If you meet the grounds for a bankruptcy restrictions order, these restrictions will be prolonged for two to fifteen years. See the bankruptcy restrictions order page for more information.
What are the costs of going bankrupt?
Unfortunately, going bankrupt costs you money, and you cannot do it for free. You have said it is arguably cheaper than other debt solutions. In recent times, bankruptcy fees have increased, and if you are married , you will need to present two petitions and pay separate fees. See the filing bankruptcy page for more information.
How long will you be bankrupt?
As you are probably aware, going bankrupt is only the start. Officially, your bankruptcy will last until your discharge, which in most cases will occur automatically on the first anniversary of your bankruptcy. It is at this point the debts are wiped. The Official Receiver or trustee may apply to the court to suspend your discharge if you have not fulfilled any of the obligations and duties placed upon you. You will then remain bankrupt until you have met specific conditions or a specified time.
Although you are discharged, you must be with the trustee, and the Official Receiver will still exist. Your assets can also be dealt with after your bankruptcy has been discharged.
What duties & obligations do you have?
When you go bankrupt, specific duties and obligations are placed upon you by law. This includes delivering an inventory of your estate, disclosing income increases during your bankruptcy and providing business accounts for the previous three years.
If you fail to comply with and these duties, you may have your discharge suspended or be in contempt of court and liable to be punished accordingly.
How to go bankrupt
To go bankrupt, you need to:
- Get as much information on bankruptcy as possible (use this website)
- Get advice
- Complete the required forms (petition and statement of affairs) (see the forms page)
- File the forms at court and pay the fees
Before taking the plunge, it will help you to:
- Establish at which court you must go bankrupt in England or Wales. It will help you make an appointment as you may have to wait.
- Make sure you have completed the forms correctly, have them checked and the consequences explained.
- Make sure that you disclose everything.
- Think about the impact of going bankrupt on your bank account, remember you will still have bills to pay.
- Establish whether your family or friends are likely to be affected.
- You should seek advice; don’t make the mistake of not doing so.
It is also worth mentioning that you cannot go bankrupt for free. Further to this you cannot go bankrupt online, only the forms can be completed.
The list goes on; please remember that information and advice are essential.
Where can I get help with going bankrupt?
Always go to someone who specialises in bankruptcy and has experience with alternatives to bankruptcy also. It would be best to ensure bankruptcy is your best option. You also need to make sure that you are fully informed of how bankruptcy will affect you and your family both now and in the future, mainly if there is a chance that you could encounter any problems.
For more information about the disadvantages of bankruptcy, please go to the consequences of bankruptcy page.
If you want to read more about me, please go to the About Me page.