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What is bankruptcy?

Bankruptcy is a way people attempt to free themselves from overwhelming debt in order to make a fresh start.

If you make yourself bankrupt you will have to give up any possessions of value and your interest in your home. All these assets are shared out fairly among creditors.

The petition can be presented to the court either by yourself or by your creditors.

Once the bankruptcy order has been made, it is advertised in 'The London Gazette' and in a local and/or national newspaper.

The Official Receiver will also give written notice of the order to a number of organisations.

At this point you no longer control your assets.

The Official Receiver or a trustee will take control of them and dispose of them, using the money to pay the fees, costs and expenses of the bankruptcy and then your creditors.

The trustee may claim property which you obtain or which you inherit while you are bankrupt and may ask the court to order you to pay part of your wages, salary or other income to him or her if your income is more than you and your family need to live on.

Full details of your duties as a bankrupt can be obtained from The

Insolvency Service website.

How long will I be bankrupt for?

Under current laws a person is usually discharged from bankruptcy 3 years after the order was made against them.

At this point they are free from all restrictions of bankruptcy.

However, there are exceptions:

If the order referred to a "certificate for summary administration", the discharge can take place after 2 years.

This certificate is issued if you presented your own petition for bankruptcy and your unsecured debts are less than �20,000.

If you present your own petition for bankruptcy but your debts are more than the above 'small bankruptcy level', the certificate is revoked and the discharge will be after 3 years.

If you have been bankrupt before (in the last 15 years) you will have to apply to the court for a discharge 5 years after your latest bankruptcy.

How do I get my discharge?

Discharge normally happens automatically, even if creditors have received no payments unless:

You have been an undischarged bankrupt at any time in the last 15 years

Your discharge period has been suspended, for example because you have failed to co-operate with the Official Receiver or trustee or

If you are subject to a criminal bankruptcy order

What happens after the discharge?

Any assets you had at the time of the order will remain at risk. This includes any assets that you managed to hold onto.

Many homeowners at the height of the recession in the early nineties who became bankrupt did not have to give up their home as it was not worth more than the mortgage owed. Equity gained since remains at risk.

You are also not free from debts arising from family court proceedings such as maintenance or personal injury claims against you.

The record of your bankruptcy will remain on the Insolvency Register for five years from the date of the order.

You can however now gain credit without having to disclose your bankruptcy status (unless specifically asked to do so).


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