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Bankruptcy Help and Advice

Overview

  • You need to petition to the court for a bankruptcy order
  • There is an automatic discharge from bankruptcy after 1 year
  • Debt Relief Orders or Individual Voluntary Arrangements would be the alternative options to use for personal insolvency

Who can initiate Bankruptcy?

Bankruptcy can be initiated by either the debtor (the person that owes money) themselves or by one of their creditors (those who are owed money). In order to start bankruptcy proceedings, a petition for a bankruptcy order must be presented to the court who will then set a date for a further court hearing to place the debtor into Bankruptcy and then to appoint an Official Receiver (a government insolvency trained official) to proceed with the bankruptcy.

Why do individuals choose bankruptcy?

People may think that there are no advantages to bankruptcy, as it carries around a negative stigma. However, depending on your individual circumstance, bankruptcy could be the right route to take.
Advantages:

  • The pressure from creditors is removed as the debtor will have no further contact with them
  • There is an automatic discharge from bankruptcy after 1 year
  • The money owed is written off with a few statutory exceptions

The bankruptcy process

If the bankruptcy is passed by the court at the hearing, then the Official Receiver’s job is to meet with the debtor to assess their situation. Then to investigate the debtor’s financial position and to receive all the debtor’s value assets and liabilities that are outside of the debtors requirements for living and working. It may be found that some of the debtor’s assets will be used to help pay back dividends to creditors. It may also be the case that the debtor themselves will have to pay a monthly contribution to the Official Receiver. All of this will depend on the circumstance of the individual entering bankruptcy.

Alternatives to Bankruptcy

An alternative to bankruptcy could be a Debt Relief Order. Please find some helpful points below that will inform you of this option:

  • Debt Relief Orders are for individuals who owe £20,000 or less and have less than £50 spare income a month.
  • The debts included in a debt relief order are; credit cards, overdrafts, loans, rent, utility bills etc.
  • A debt relief order usually lasts for 1 year and during this time creditors will not be able to take action against the individual to retrieve their funds.
  • To apply for a debt relief order you will need to speak to an adviser such as an Insolvency Practitioner, who have the ability to fill in the necessary forms online.
  • Once the debt relief order is approved, the creditors listed on the order will not be paid and the debtor will be protected from them taking legal action.
  • At the end of the debt relief order, the debts listed on the order will be written off.

A further alternative may be an Individual Voluntary Arrangement, follow this link to read about this option.

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