(not Scotland - see LILA Sequestration)
Bankruptcy may be the best solution for individuals facing a catastrophic level of debt that they have little or no prospect of repaying within a reasonable period of time. Bankruptcy can also be a suitable option where a lack of assets leads an individual to decide they have little to lose from going bankrupt.
In simple terms the process works in two stages:
Firstly the individual must “petition” for their own bankruptcy at their local Court that handles this type of work. If the Judge is satisfied that the bankruptcy should go ahead the individual will be declared bankrupt at Court and the debts will effectively no longer exist. Most people are “discharged” from bankruptcy about a year later.
Secondly the individual will need to work with the Official Receiver’s office. This team will take responsibility for your financial affairs and will seek to return money to your creditors where it is possible to do so. This could mean that the individual makes monthly payments where affordable for a fixed period (often three years) or the realisation of your assets (for example the sale of a home or of a vehicle of significant value).
Any individual who wants to go bankrupt can obtain the required forms from the Court Service website. Once completed you will need to make an appointment at the Court that covers the area in which you live. You will be able to find your local Court using the Court Service website. As well as taking the completed forms on the day of the appointment you will need to pay a substantial fee to cover the costs of the Court and the Official Receiver. At the time of writing this is a little over £500. Reductions in this amount can be made in certain circumstances, for example when an individual is in receipt of benefit income only.
The actual procedure varies from Court to Court. You will generally need to report upon arrival at Court and will then spend some time with a Court Officer who will collect your fee and check the completion of your forms. If satisfied that the forms have been properly completed the matter will then go before the Judge. One Judge may insist that you go before them in the courtroom while others will simply meet with the Court Officer while you remain in a waiting room outside.
Provided all is in order you will generally be made bankrupt there and then. You may then be asked to remain at the Court to speak by telephone to the Official Receiver’s office. The Official Receiver is effectively now in control of your financial affairs. They will ask some questions about your circumstances and then arrange a further meeting with you. They may request that this meeting be over the telephone or if your affairs are more complicated they might require you to visit their offices. The purpose of this meeting is to establish whether, by monthly contribution or sale of assets, you are in a position to repay some of the debts.
The fact that you have been declared bankrupt may be publicised in the Notices section of your local newspaper.
Many companies now exist offering to help you with the bankruptcy process in return for a fee that can sometimes be as high as £2000. In our opinion these types of fees are not justified unless your case is especially complex. Most people find that they are able to complete the forms themselves and can find the answers to questions they might have by searching online, using debt web-forums, or visiting their local Citizens Advice Bureau.
There are a huge number of myths about bankruptcy that cause people to fear the process. In many cases it does not result in the loss of a home, modest vehicles can be kept where they are reasonably required, and necessary domestic items are not going to be removed. However the implications of bankruptcy can be very serious for certain people running businesses, those with equity in their home, and for persons in certain professions.
As with all the other potential solutions to debt the advantages and disadvantages associated with bankruptcy do vary a lot from person to person depending upon their own circumstances. Please contact the support team if you’d like to discuss whether bankruptcy is the best solution for you.
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