Summary
Bankruptcy is far from enjoyable but if you’re having to face it, it is best knowing what to expect. This article gives helpful information on how to cope with this situation
If you have serious debt you could be deliberating bankruptcy. It’s important to grasp what bankruptcy implies and whether it is the right choicefor you.
What is bankruptcy? Bankruptcy is a intrim legal condition. When bankrupt, your non-essential assets such as possessions, property including excess income are used to pay some of your creditors. Most debts are discharged at the end of the bankruptcy period. This may be an effective way of clearing online debt that you might never be able to pay.
What is the time limit for bankruptcy?. Bankruptcy generally lasts for 1 year. After this period, you will be ‘discharged’ from your bankruptcy in spite of how much you still owe. You may be discharged earlier if you have co-operated fully with the Official Receiver. Conversely, in a minority of cases and if you have behaved negligently, bankruptcy can remain for much more than 1 year.
How do you become bankrupt? A court pronounces you bankrupt by issuing a ‘bankruptcy order’ after it’s been supplied with a ‘bankruptcy petition’. By and large this occurs in 1 of 2 ways.
Firstly by filing your own bankruptcy petition. A debtor’s petition form can be downloaded from the Insolvency Service website or aquired from county courts with bankruptcy jurisdiction. The form should be filled in and then taken to your nearest county court, that has bankruptcy jurisdiction. A fee of 150 pounds and deposit of £360 is payable at this time. This amount cannot be waived.
How does a creditor make you bankrupt?. Your creditors can serve a creditor’s petition if your unsecured debt is over 800 pounds. Once the bankruptcy proceedings have commenced, you are obliged to co-operate fully even if it’s a creditor’s petition and you contest their claim.
Where is a bankruptcy order made? Bankruptcy petitions are in general presented in a county related court near where you live or trade.
Who would have to deal with your bankruptcy? Once a bankruptcy order has been filed against you, your creditors can no longer hunt you for payment. Payment of the money owed becomes the responsibility of the trustee. An Official Receiver is assigned if you don’t have any assets. If you have some assets, an Insolvency Practitioner will be appointed to act as trustee and sell your assets to pay off your creditors.
What occurs when you are bankrupt?. As soon as you’re bankrupt, the Official Receiver, or assigned trustee, can sell your assets to pay your creditors. Although, particular goods are not treated as assets for this purpose, for instance: required work equipment and needed household items such as clothing, bedding, furniture.
The Official Receiver make an assessment of your income taking into account expenses and decide if payments can or should be made to your creditors. You may be asked to sign an ‘income payments agreement’ to pay fixed monthly payments from your income for four years.
What are your obligations?. You must: Give the Official Receiver information about your finances, assets and creditors, and take them to the Receiver with the appropriate paperwork, for example bank statements and insurance policies notify your trustee of any new assets or income, throughout your bankruptcy cease using debit, credit cards or store cards, bank or building society accounts, do not apply for credit over 400 pounds without telling the creditor that you’re bankrupt, not make payments straight to your creditors. It is probable that you will have to go to court and explain why you’re in debt.
If you are thinking about declaring yourself debt or you are being threatened with bankruptcy, it is crucial to get independent advice.
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