Bankruptcy

• Your personal details.
• Your employment details.
• Details of your bank accounts and any savings accounts.
• Details of your assets, for example your car and property details if applicable.
• Details of the money you owe, including account numbers and outstanding balances.
• Details of your income and your expenses.
• Details of any legal proceedings you have been served with.
• Your debt history for example your reasons for accruing the debts.

The application is relevant if you live in England and Wales or have lived there in the past 3 years. The application needs to be completed accurately. Bankruptcy is a legal process and there can be problems if you fail to detail all of your information correctly.

Before submitting your application, you will need to pay a £680 fee. This consists of a £130 adjudicator fee, and a £550 bankruptcy deposit.

Once submitted, you application will be reviewed by the adjudicator.

Once you are made bankrupt, this is followed by an interview with the Official Receiver, who initially acts as Trustee in Bankruptcy. The Official Receiver has 12 weeks to decide whether an independent Trustee should be appointed to manage the bankruptcy and if so, whether a meeting should be held to appoint the Trustee.

Whilst the above process is taking place your bank accounts may well be frozen meaning you won’t have any access to money. 

Period of Bankruptcy

The discharge period for bankruptcy is twelve months after the date of the Order if the Official Receiver reports that there are no matters of concern. 

Assets

The assets excluded from bankruptcy are comprised of:

• Personal possessions of a reasonable value
• Tools of trade including vehicles, books or other items of equipment needed personally in your employment

The Trustee in Bankruptcy will then decide what happens to all assets not exempt from bankruptcy. They have a duty to realise these assets for the benefit of creditors. However, it is possible to agree with the Trustee that a sum of money is paid to them to enable you to keep hold of the asset. This money must come from an independent source and cannot be your money.

The bankruptcy proceedings are advertised in the London Gazette and can be advertised in a local paper if the Trustee feels this is necessary to bring your bankruptcy to the attention of creditors. Advertising in the local press is at the discretion of the Trustee.

Please take a look at the information we provide for each solution, and the applicable fees. There are various options that exist to help you deal with your debt problems. These include: Individual Voluntary Arrangements (IVAs), Bankruptcy, Debt Relief Orders, Debt Management Plans, and Debt Consolidation (Subject to suitability and criteria). Entering a debt solution will affect your credit rating.

Before considering opting for Bankruptcy, it is important you consider how your property is dealt with.

Your Share of Equity

Your share of equity is calculated by deducting the balance of your mortgage from the current value of your property. If the property is owned jointly, then generally it is assumed that you are entitled to 50% of the equity. See example below:-

Calculating your share of equity can be more complex especially if the property is in your sole name but you live with your partner. Your partner maybe entitled to a share of the equity (this is called beneficial interest) if your partner can demonstrate that they have contributed to the mortgage and or upkeep of the property over a period of years.

If your share of equity is less than £1,000, your equity will be excluded but may have to pay for a solicitor to help you get the Bankruptcy Restriction removed from your property.

Trustee’s Duty

The Trustee in Bankruptcy is obliged to recover a sum of money equal to your share of equity in the property. A Bankruptcy Restriction will be added to the property’s entry on the land registry and you will not be able to sell or refinance your property without agreeing a deal with your Trustee. The registration can be removed if you can demonstrate you do not have an interest in the property.

The Trustee has 3 years to deal with your share of equity in your property. If for some reason your Trustee was struggling to get you to co-operate with either introducing a sum in lieu of your equity or selling the property, they can apply to court for a possession order and ultimately you could be evicted from your property. So dealing with a Trustee quickly and promptly in relation to your share of equity is vital.

A Bankruptcy Restriction Order is an order that can be made against you when you have been made bankrupt if it is found that your behaviour prior to bankruptcy is dishonest, reckless or fraudulent.

A BRO can extend the restriction of bankruptcy for up to 15 years. 

The effects of a BRO include:-

• Obtaining credit beyond £500 without Court’s permission is a criminal offence.
• The Bankrupt has to trade in the name under which the they were adjudged bankrupt.
• Prohibition from acting as a director of a limited company.

There may be other restrictions, including but not limited to, being unable act as a local councillor or a school. governor, exercise a right to buy or be a Member of Parliament in England or Wales. If a BRO is made against you and you break any of the restrictions, you’ll be committing a criminal offence. You could be fined or even sent to prison. The period of the BRO will depend on how culpable the bankrupt is deemed to be. As a guide the period for the restrictions is imposed as follows:

• 2 – 5 years Culpable Behaviour – incurring debt knowing you could not settle it
• 5 – 10 years Reckless Behaviour – for example racking up debts by gambling
• 10 – 15 years Dishonest Behaviour – getting involved in fraudulent activities

What can lead to a BRO? 

The official receiver can ask the court to look at any of the following behaviour when deciding if a BRO should be made

• Incurring debts that you knew, or ought to have known, you had no reasonable chance of repaying.
• Giving away assets or selling them at less than their value.
• Deliberately paying off some creditors in preference to others.
• Gambling or making rash speculations or being unreasonably extravagant.
• Failing to keep or produce records that would explain a loss of money or property
• Behaving fraudulently e.g. giving false details to obtain credit.
• Causing your debts to increase by neglecting your business affairs.
• Failing to supply goods or services that have been paid for (e.g. taking deposits).
• Carrying on a business when you knew or ought to have known you could not pay your debts
• Not cooperating with the official receiver or trustee.

When deciding whether to make a BRO, the court and The Official Receiver will look at your behaviour before and after bankruptcy. The length of your BRO depends on how much creditors have lost, your attitude, how aware were you of your situation at the time of the behaviour and the likelihood of you doing it again.

Bankruptcy Restriction Undertaking

If you receive a notice from The Official Receiver that they intend applying for a Bankruptcy Restriction Order, you will be provided with a copy of the application to the court which sets out what the Official Receiver believes you have done and any supporting evidence. You need to decide whether you propose to challenge the application or accept the BRO application. Acceptance can mean that the term of the restriction is less than the term the court is likely to determine. The acceptance is effectively agreeing to a Bankruptcy Restriction Undertaking (BRU) and the details of a BRO/BRU go onto the public insolvency register until the end of the BRU.