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Bankruptcy Questions and Answers

1 What is Bankruptcy? 2 What are the effects of Bankruptcy? 3 Who deals with bankruptcy cases? 4 How long does Bankruptcy last? 5 Alternatives to Bankruptcy 6 Disadvantages to Bankruptcy

Answers

1 What is Bankruptcy?

Put simply, bankruptcy is a way of dealing with debts that you cannot pay.

A bankruptcy order may be obtained by any creditor owed more than £750, or you yourself may apply for the court to make an order.

2 What are the effects of Bankruptcy?

Once you have been made bankrupt all assets belonging to you come under the control of the trustee, including your home. These assets owned by you might be used to pay off your debts.

After one year all of your outstanding debts are written off and you can make a fresh start in your life.

3 Who deals with bankruptcy cases?

The Official Receiver is a civil servant and an officer of the Court. He/She will act as a trustee of your estate unless a private sector insolvency practitioner is appointed.

4 How long does Bankruptcy last?

A bankrupt may be discharged after:

  • Two years if the debtor petitioned for his or her own bankruptcy and where the amount owed was less than £20,000
  • Three years in other cases except: five years if the person has been bankrupt before in the previous fifteen years.

When you are drowning in debt and want fresh start in your life, bankruptcy is one option although there are other alternatives to become debt free.

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5 Alternatives to Bankruptcy 6 Disadvantages to Bankruptcy

The main disadvantages of bankruptcy are as follows:

If you have equity in the house, even if it is jointly owned, it may have to be sold. The trustee will, however, be encouraged not to take any action to force a sale during the first 12 months, so you have reasonable time to make necessary arrangements, such as selling your share in the property to a friend.

You may be ordered to pay contributions to your creditors for up to 3 years at a rate determined by the Court or the Official Receiver.

You must disclose your bankruptcy status for certain transactions e.g. opening a bank account, obtaining credit and applying for certain jobs. Often this disclosure causes difficulties.

Even if some of your assets remain unsold at the end of your bankruptcy, they may still be available for sale by the trustee. The existence of the bankruptcy will also remain on file with the land registry and other credit reference agencies.

In a number of circumstances bankruptcy can be a positive way to resolve debt problems as all debts, aside from mortgages and the like, are wiped out on the making of the bankruptcy order.