WHAT IS BANKRUPTCY?
There are two main ways to be declared as bankrupt. You can either apply yourself or your creditors can apply to have you declared as bankrupt if you owe over £750. An Insolvency practitioner can also apply to have you declared as bankrupt if you do not stick to the terms of your IVA.
While bankruptcy can be helpful in giving you a fresh start and ‘solving’ your debt situation, there are also a number of downsides which must be considered, including:
- You lose control of your assets
- You cannot apply for credit over £500 without telling the person that you are obtaining credit from that you are bankrupt
- You cannot be a company director whilst you’re bankrupt
- Your credit rating is likely to be affected even after you are discharged from bankruptcy, with it staying on your credit reference file for up to 6 years from the date of your bankruptcy
Once the bankruptcy order has been made, everything that you own (known as the bankrupts assets) forms part of the bankruptcy estate which can be used to settle any unpaid debts. At this point you must disclose all of your assets to the Official Receiver or Trustee, who will then decide if you can keep them.
Someone else declaring you as bankrupt
If you have over £750 of unsecured debts then your creditors can apply to the Court to have you made bankrupt using a bankruptcy petition. The usual grounds are that the debtor cannot pay their debts as they fall due, which the creditor must then prove.
Declaring yourself bankrupt
If you have decided that declaring yourself bankrupt is the best option for you, you have two options: