Bankruptcy in the UK

Of course the perceived stigma of  bankruptcy in the UK, creates money and health problems. Bankruptcy is when a court makes a bankruptcy order after a bankruptcy petition has been presented. By:

  • Yourself (Debtor's Petition); or

  • Creditors who are owed at least £750 by you (Creditors' Petition)

Even if one refuses to acknowledgement.

If you dispute the creditors' claims you should try and reach a settlement with them before the bankruptcy order is made: trying to do so afterwards is difficult and expensive.

Bankruptcy is also  a logical, legal way for many people to  remedy bad debts.

So what reasonable solutions exist today for good people with bad debt? The cold answer, not many.

How much will it cost to make myself bankrupt?

There are three fees you may have to pay:

  1. The Court fee of £120
    In some circumstances the Court may waive this fee; for example, if you are on Income Support. If you are not sure whether you qualify for a reduction in the fee, or if you are exempt from paying the fee, Court staff will be able to advise yo    u.
     

But before you jump into bankruptcy, Read what the UK government Insolvency Service has to say about bankruptcy.

The Insolvency Service Website

Wide range of government information and services online ...
 www.insolvency.gov.uk/

"Before you take any action to apply for your own bankruptcy, you should get your own legal or financial advice about bankruptcy and the other options available to you. The Insolvency Service and the courts cannot advise you on specific insolvency problems; for example, whether you should go bankrupt or your company should go into liquidation, or whether you should look at alternatives. You should get independent advice. You may consult a solicitor, a qualified accountant, an authorised insolvency practitioner or a reputable financial advisor."

What will happen at Court?

The Court will either hear your petition straight away or arrange a time for the Court to consider it.

If English is not your first language and you need an interpreter, the Court will not be able to help you find one. You will have to do this yourself and pay interpreter's fees.

At the hearing the Court can do one of four things:

  1. Stay (delay) the proceedings - often because the Court needs further information before it can decide whether to make a bankruptcy order.

  2. Dismiss the petition - perhaps because an administration order would be more appropriate.

  3. Appoint an Insolvency Practitioner - if the Court thinks that an Individual Voluntary Arrangement would be more appropriate. This will only be possible if your assets are more than £2,000; your unsecured debts are less than £20,000; and you have not been bankrupt or made an Individual Voluntary Arrangement in the previous five years. If you do not wish to enter into such an arrangement, you should inform the Court.

  4. Make a bankruptcy order. You will be bankrupt the moment the order is made by the Court.

As well as a bankruptcy order, the Court may issue a certificate of summary administration - as long as your unsecured debts are less than £20,000 and in the previous five years you have not been bankrupt or made an Individual Voluntary Arrangement with your creditors. If the Court issues you with a certificate of summary administration, it will make the administration of  bankruptcy quicker and simpler.

The Official Receiver will then be your Trustee in bankruptcy and you will automatically be freed from bankruptcy (known as 'discharged') two years from the date of the bankruptcy order.

If a certificate of summary administration is not made, your discharge from bankruptcy is usually three years from the date of the bankruptcy order.