Glossary

As a 'last ditch' attempt, bankruptcy allows the debtor's outstanding debts to be written off, whilst any remaining assets are liquidated to contribute towards the balance.

In order to commence bankruptcy proceedings, creditors must be owed at least £750. They will initiate by sending a 'Statutory Demand' to the debtor before presenting a Bankruptcy Petition to the court, where there will be a hearing before the District Judge. The bankruptcy proceedings will then take three years to resolve.
The debtor may reduce this period to two years if they voluntarily commence the proceedings themselves (i.e. 'declare themselves bankrupt') on the condition that the monies outstanding amount to less than £20,000.

In order to declare themselves bankrupt, the debtor must pay an upfront cash fee amounting to approximately £400, to cover court costs, and an initial deposit. They will then meet with the Official Receiver who will require various data regarding financial commitments, assets and overall cash flow.

The Official Receiver will take into account issues such as previous financial conduct and the debtor's personal situation. In very severe circumstances where legal offences have been committed the debtor may be fined or in extreme cases, imprisoned. Typical offences would include concealment of ownership of property, or giving it away to avoid it being liquidated.

Consequences of going bankrupt include:

• Details of the proceedings will be made available to the public via local, national and trade press where applicable.

• It is likely the debtor will be required to close their bank/building society account(s). They will be allowed to create new ones only at the discretion of the bank/building society and Official Receiver.

• It is unlikely that the debtor will be allowed banking facilities such as chequebooks or debit cards.

• Utilities companies will generally require the debtor to pay for services upfront, for example by installing a coin-operated electricity meter, or moving their phone bill over to pre-pay.

• If the debtor is a company director, it is highly likely their business will be closed down.

• The debtor's job may well be jeopardised, particularly if they work in the financial sector or hold a position of fiscal responsibility.

• The debtor will be disallowed from holding positions of public office.

• The Bankruptcy Order will remain registered with credit scoring agencies for a minimum of six years. Even after this period has elapsed, it is usual for the debtor to be required to disclose that they are 'Discharged Bankrupt' when seeking credit. Data regarding the proceedings will also be held on the national Individual Insolvency Register for five years.

It is worth bearing in mind that Bankruptcy Law is extremely complex, and advice cannot be given without complete knowledge of an individual's situation.

For specific advice on your situation contact us