This article is for general guidance only. If bankruptcy proceedings are taken out against you or if you are considering filing for bankruptcy you should seek advice from a solicitor, an accountant, or an authorised insolvency practitioner.
What is bankruptcy
Bankruptcy is a legal solution to eliminate your debts. It is insolvency for individuals. Bankruptcy should be used only when other options have failed because the consequences are severe. The person who administers a bankruptcy is called a trustee. Anyone considering filing for bankruptcy should not do so without first seeking advice.
What are the effects of bankruptcy
It allows you to make a fresh start, albeit with restriction. If an individual is declared bankrupt it means they will need to handover all their assets, including their home, to their trustee who will share these assets among the creditors. Anyone can file for bankruptcy including members of a partnership. However the procedures for dealing with partnerships and companies filing for insolvency are different.
A debtor will be allowed to keep some assets, such as those essential for everyday living but they may have a portion of their income deducted. This money will be used to fund the administering of the bankruptcy and to pay off as much as possible to the creditors. Your personal details will also be published in the local paper.
Circumstances more favourable to bankruptcy
Filing for bankruptcy is more favourable for some people than others. The following circumstances are more favourable to filing for bankruptcy:
- having no assets
- living with family or friends or in rented accommodation
- having a livelihood that would not be lost or adversely affected by bankruptcy
Filing for Bankruptcy?
In the UK you can file for bankruptcy yourself. In order to do this you will need a bankruptcy form or debtors petition at the High Court in or at London a local county court. You must show that you are unable to pay your debts in order to do this. Filing for bankruptcy means you will need to complete two forms and pay some costs.
Filing for Bankruptcy – The Creditors Petition
If you owe one or more of your creditors at least £750 then, provided the amount is unsecured, your creditors can petition to start bankruptcy proceedings. This can be done even if you do not agree. If this process has been started by your creditors and you wish to avoid bankruptcy it is important that you act quickly or contact professionals for advice.
For more information on:
- The Bankruptcy Forms
- The Cost of Filing for Bankruptcy
- How long does a bankruptcy last?
- Are there alternatives to bankruptcy?