Before the introduction of the Individual Educational System (IVAs) and Debt Relief Order (DROs), bankruptcy was the only way to get rid of your debt.
Key features of Bankruptcy
Bankruptcy is an action under the law, through which we can get relief from all the debts taken by people and institutions. Most often, it is imposed in the courts on the orders of the bankruptcy court and it is usually done in court by the debtor.
Benefits of bankruptcy.
- Write off your unsecured debts.
- You won't talk directly to people who owe you money.
- You should be able to make a fresh start, usually after 12 months.
- Nothing will get rid of student loan debt but bankruptcy will prevent your lenders from taking action.
What happens to my home or property in bankruptcy?
1-It is part of the duties of the Official Receiver (OR) or Trustee in Bankruptcy to maximize the return to creditors, which means they will look to extract any beneficial interest (equity) you may have in a property you own. 2-Your beneficial interest is defined as your share of the net proceeds from the sale of the property i.e. the difference between the sale price and any expenses such as the mortgage settlement figure and conveyancing fees. If you share entitlement then the proceeds will need to be split (usually in a ratio1:1) 3-You do have the opportunity to keep your home if a family member or friend is willing and able to purchase the beneficial interest (it saves the OR a lot of time and hassle and they’d much prefer to do this). You need to contact the Official Receiver to discuss the options. 4-In some circumstances (if you have dependents or a partner living with you for example) you are able to defer sale of your home in bankruptcy until the end of the first year in order to give you enough time to make alternative housing arrangements. 5-If the Trustee hasn’t sold the property within three years of the Bankruptcy Order the beneficial interest will be returned to you (as long as it is the main residence of either you or your civil partner/spouse or former civil and that the Trustee hasn’t obtained an order for sale, possession or charge). However, it’s worth noting that the Trustee can sell the beneficial interest to a 3rd party, who will not be subject to the same time restrictions. 6-Debt Advice Foundation is a registered UK charity offering free, confidential support and advice on any aspect of debt, including Bankruptcy. If you need Bankruptcy advice or would like to discuss the alternatives, please call the charity’s debt advice helpline on 0800 043 40 50 to speak to an adviser.
What should I do if I’m facing bankruptcy?
If you’re facing Bankruptcy, the first thing you need to do is to get advice from an impartial debt advisor who can explore whether any of the alternatives to Bankruptcy are appropriate for your circumstances. If an IVA is appropriate then you can apply to your local County Court for an interim order, which prevents your creditors from presenting, or proceeding with, a Bankruptcy petition for the duration of the order (which is usually 14 days). If a Debt Relief Order (DRO) is appropriate, and if a petition for your Bankruptcy has already been submitted, then you will either have to wait for the court to refer your case (if you petitioned) or get your creditor’s permission (if your creditor petitioned), as you cannot apply for a DRO whilst involved in any other formal insolvency procedure. You can read more about Bankruptcy and whether it is suitable for your situation in our Bankruptcy section. Debt Advice Foundation is a registered UK charity offering free, confidential support and advice on any aspect of debt, including Bankruptcy. If you’re facing Bankruptcy or would like to discuss the alternatives, please call to speak to an adviser.
How do I go about filing for bankruptcy?
If you’re considering filing for Bankruptcy, you will need to complete an online application form. You will also need to pay the following fees to the Insolvency Service: The adjudicator’s fee, currently £130. Bankruptcy administration fee of £550. For more information on filing for Bankruptcy, see how do I go about declaring bankruptcy. You can read more about Bankruptcy and whether it is suitable for your situation in our Bankruptcy section. Debt Advice Foundation is a registered UK charity offering free, confidential support and advice on any aspect of debt, including Bankruptcy. If you need to talk to someone about Bankruptcy or would like to discuss the alternatives, please call to speak to an adviser.