What Are The Steps To Going Bankrupt?
 

The first step is that someone must ask the court to make you bankrupt, this is usually;

If you are given a creditors petition, you can still be made bankrupt even if you do not acknowledge the court's letters. So it is best that you co-operate at all stages with the court.

If the court agrees with the person making the petition and after assessing the status of the individual then it will grant a bankruptcy order, thus making the individual bankrupt.

How Much Will It Cost To Go Bankrupt?

If a creditors petition is made against you, it will cost them and not you to start the process off. However if you wish to start the process yourself by using a 'Debtor's Petition' then there are fees involved and payable at certain stages of the process.

Step 1) Court Fee of £120, the court staff will be able to advise you if you qualify for a reduction in this fee or even be able to waive it.

Step 2) Deposit of £250 towards the costs involved in the administration of making you bankrupt. The deposit has to be paid in all cases.

Step 3) When dealing with the County Court, there is no fee charged to swear the affidavit, which is part of your statement of affairs. But in the High Court there is a £7 charge.

If you are a married couple and you are both applying for bankruptcy, you will each have to pay separate fees. If you were in business as a partnership, each partner will have to pay separate fees, unless all the parties apply for a joint bankruptcy petition under the Insolvent Partnerships Order 1994 (Form 16).

The above fees should be paid in cash, postal orders, or by a building society, bank or solicitor's cheque. Cheques should be made payable to H M Paymaster General. Personal cheques will not be accepted. 

At Which Court Will The Bankruptcy Petition Be Heard

Bankruptcy petitions are usually made to the High Court or a Local County Court. It may be that if it is a creditor that is attempting to make you bankrupt, then they will petition to their local County Court. However this will usually be transferred to the Court local to the petitioned (defendant).

If you wish to declare bankruptcy yourself, you must contact your local County Court, Click Here to find your local Court's contact details.
 
 What Will Happen During A Bankruptcy Hearing
 

The Court will consider if it is everyone’s best interest to hear the petition immediately or arrange a time for the Court to consider it. Problems like one of the parties not being able to speak English could cause a delay. Although on this occasion any interpreter will need to be paid for by the petitioned.
 

During the Hearing the Court may decide one of 4 outcomes;

1)      Stay or otherwise known as a delay in the proceedings, usually because the Court needs further information before it can come to a decision on the Bankruptcy order.
 

2)      Dismiss the petition – this is because an administrative order is sometimes the best option.
 

3)      Recommend an IVA, if the Court believes an Individual Voluntary Arrangement is more suitable. IVA’s will only be possible on this occasion is your assets are more than £2,000 and your secured debts are less than £20,000. In addition you must not have been made bankrupt in the previous 5 years, nor had an IVA arranged for you. However as in the title this is voluntary and not an order. So you must make the court aware if this is not an option you would like.
 

4)      Grant a Bankruptcy Order. At this point you will be declared bankrupt.

 

As well as a bankruptcy order, the Court may issue a certificate of summary administration - as long as your unsecured debts are less than £20,000 and in the previous five years you have not been bankrupt or made an Individual Voluntary Arrangement with your creditors. If the Court issues this certificate, it will make the administration of your bankruptcy quicker and simpler.
 

The Official Receiver will then be your Trustee in bankruptcy (see below) and you will automatically be freed from bankruptcy (known as 'discharged') two years from the date of the bankruptcy order. (If a certificate of summary administration is not made, your discharge from bankruptcy would usually be three years from the date of the bankruptcy order.)

After you have been declared bankrupt, all assets belonging to you come under the control of the Receiver / Court Trustee, including your home.

Where a property is co-owned, the debtors interest can still be paid to the mortgage company, however they cannot make any payments against a mortgage that are above the amount charged for interest each month. So they cannot reduce the size of the mortgage. This protection lasts for 12 months, at the end of which the property will in almost all cases be put up for sale by the Court.

Bankruptcy does carry some kind of stigma that people wish to avoid; this is one of the main reasons why people try to avoid it at all costs.

A Bankrupt may not; 

1.     Obtain credit of £250 or more alone or jointly with another person without disclosing his or her bankruptcy

2.     Conduct business directly or indirectly in any name other than that in which he or she was made bankrupt

3.     Be involved directly or indirectly in promoting, forming or managing a company without the Court’s permission

4.     Hold certain public offices

When a bankrupt is discharged after an amount of time set out at the Court hearing these constraints are ended.

A person who is bankrupt may open a new bank or building society account but must disclose the fact that they are bankrupt. The bank or building society may then impose conditions and limitations. Overdraft facilities or chequebooks must not be obtained, as they are likely to be dishonoured. The bankrupt must inform the Trustee of any funds available in the account, which exceed the normal living expenses, in order for the Trustee to share out amongst the creditors. 


What Will Bankruptcy Do To My Credit Rating?

Bankruptcy orders will stay on your credit file for up to 6 years. You may stay however have to declare it to a mortgage company if you are asked.

How Long Does Bankruptcy Last?

A bankrupt may be discharged after the one year; this is the most common decree in the England and Wales.

Discharge is not always guaranteed and can be delayed by the Court. Plus, the discharge may not necessarily free that person from all liabilities and does not mean that unrealised assets will be safeguarded.

Discharge releases the individual who is bankrupt from most of the debts owed at the date of the bankruptcy order. Exceptions include debts arising from fraud, certain crimes, fines and other fees owed the Her Majesty’s Government. Certain other debts such as damages or personal injury or money owed under family proceedings (such as maintenance) will be released only if the Court agrees.

If you have been declared bankrupt within the last 15 years, you will not be automatically discharged. You will only be able to apply to the Court for a discharge 5 years after the date of your current bankruptcy order; even then the Court may refuse or delay discharge.