Bankruptcy is an option in dealing with debts which the debtors can't pay. Their assets will be used to pay their creditors. The bankrupt persons are subject to certain restrictions where they may not be allowed to raise credit without informing their creditors. Moreover they may not act as director of a company. The term bankruptcy refers only to individuals, not to companies or other legal entities.
With the Enterprise Act 2002 taking into effect in April 2004, England & Wales bankruptcy proceedings should not go beyond 12 months. This period begins at the time the Official Receiver files in court a certificate of investigation completion.
Thus, at the end of this period bankrupt is discharged and the debtors cease to be liable for their bankruptcy debts.
One consideration for bankruptcy is when individuals, sole traders and members of a partnership have personal debt of more than £750 and unable to pay for it. The process of bankruptcy starts when person applies for his own bankruptcy which is called as debtor's petition, but when applied by other party it is called creditor's petition.
Before you apply for a bankruptcy petition we suggest that you seek the advice of a debt advisor. If you consider our company, Debt Consolidation 247 we'll give you our experienced financial specialist who'll assists throughout the process. Whichever petition is utilized, only the court can declare a person bankrupt. The next step is for the Official Receiver (OR) of the Insolvency Service to take control of the bankrupt's assets.
The OR which may assume the role of trustee in bankruptcy may continue to supervise its sale and distribution. The proceeds will then be distributed to creditors in accordance with the statutory order of distribution.
The advantages are as follows:
You'll be relieved of the pressure as you don't have to deal with your creditors.
You're permitted to retain certain basic things such as household goods and a realistic amount to daily living.
After successfully implementing the bankruptcy order usually within one year, you can have a new beginning.
Some outstanding debts usually will be written off.
Many creditors will take back court action following a bankruptcy order.
Most creditors will stop pursuing you and make claim to the trustee instead.
No more personal dealing with your creditors.
The Disadvantages are as Follows:
Your situation will be advertised in the local press and the London Gazette.
Time consuming as there are many forms to be filled up and several meetings with the OR. If appointed OR will become a Trustee in Bankruptcy.
Your other businesses will be closed and employees dismissed.
House, life insurance, pension, etc. will lose its real value.
During bankruptcy you'll lose acquired assets such as inheritances, insurance settlements, house appreciation value, etc.
Information will be furnished to your building society, creditors, landlord, etc.
Bank accounts, credit cards, etc. will be closed. Leased assets or buying on hire purchase will be returned immediately to the owner.
You'll lose professional and business status, prejudice your employment opportunities and face rejection from many associations and societies.
Bankruptcy should never be regarded as an easy solution of settling your debt. If you're planning to petition for bankruptcy, herewith are some important facts that are worth knowing:
Under UK law, any UK resident can declare legally to be bankrupt.
You'll pay a bankruptcy court petition fees ranging from £400 and £500.
Time consuming and tedious work as you'll have to complete a bankruptcy petition and a 30-page statement of affairs.
Possible court's refusal of your application for bankruptcy.
Bankruptcy comes with severe restrictions.
You'll lose control over your assets.
There's a great possibility of losing your house.
Your Official Receiver will become the investigating arm of the court on your financial affairs.
Fortunately you'll not be bothered by your creditors regarding money matters.
Bankruptcy period is limited to 12 months. Any unpaid debts will be written off.