Bankruptcy is a formal process where an individual declares they cannot pay their creditors. Since April 2016 in England & Wales Bankruptcy can only be done on-line. This means the courts are not involved in any debtor bankruptcy applications. The application process is different in Northern Ireland (see below).
All applications need to be submitted online via the central UK Government website, GOV.UK, to an adjudicator within the Insolvency Service who will determine the application. Only the bankruptcy applicant can submit the application. Upon approval of the bankruptcy, a bankruptcy order will be sent to the Official Receiver who will take control of all of your assets and, if appropriate, manage the payments to your creditors through the sale or disposal of these assets.
In Northern Ireland, you must complete a bankruptcy petition form and a statement of affairs and take these to the High Court. These forms can be obtained on-line. You must then swear an affidavit before a solicitor stating that the information you are giving the court is true, a fee will be charged (see below). For further information, go to CitizensAdvice.org.uk and click on the ‘Debt and money’ link.
Before you apply for bankruptcy you need to identify which debts are not automatically written off and work out how you will pay for them once the bankruptcy is finalised. These include the following:
• Student loans
• Magistrates court fines
• Various benefits and tax credits over-payments.
• Maintenance payments and child support payments, including any lump sum orders
• Secured loans and other secured debts, such as debts secured with a charging order
• Any payments a court has ordered you to make under a confiscation order, for example, for drug trafficking
You will find that most debts can be included in the bankruptcy and they will be written off automatically at the end of the bankruptcy period.
In most circumstances bankruptcy will last for one year, after which time you will be debt free. If however you have spare income that can be used to pay your debts then the arrangement can be extended to three years. This is known as an Income Payments Agreement or an Income Payments Order.
Although bankruptcy can relieve you of the pressures of debt it must not be entered into likely as there are areas that will effect you in the years to come. Firstly you will have no control of your assets and can lose your home. Credit reference agencies will register your bankruptcy and it will also be logged on the Insolvency Register for public use. This will have a severe effect on your credit rating for between 6 and 15 years. You will also have to declare any previous bankruptcies when applying for future loans or mortgages.
If you are self-employed you will need to close your business and you will have restrictions on future self-employment whilst bankrupt.
• You cannot act as a director of a company
• If you manage a business you must inform those you do business with you are bankrupt
• You must not borrow more than £500 without telling the lender you are bankrupt
• The Official Receiver must grant permission for you to create, manage or promote a company
If you are employed you should check your contract to see if you are able to apply for bankruptcy and keep your job. Many employers will not allow you to work for them if you are bankrupt. If you are regulated by the Financial Conduct Authority or a Solicitor for example you cannot apply for bankruptcy if you want to maintain these professions.
The costs to apply for bankruptcy differ in England & Wales and Northern Ireland and are as follows:
England & Wales
- Total Cost = £680.00
- This consists of an adjudicator fee of £130 and a bankruptcy deposit of £550.00.
- Total Cost = £647.00
- This consists of a £525 deposit, £115 adjudicator fee plus a solicitor’s fee of £7 for the sworn affidavit.
Payments can be paid on line or by cash at any Royal Bank of Scotland Branch. Payments can also be made via installments at a minimum of £5.00 per payment but this only applies to card payments made on-line in England & Wales.
You will need to disclose all your financial information, including your income and any assets you hold such as property, savings, pensions, etc… You may also be requested to attend an interview with the Official Receiver.
It is also worth noting that if you have a creditor you owe £5000.00 or more to they can petition to have you made bankrupt.