What Happens To Your Business
If youre self-employed, your business will be closed. Any business assets will be claimed by the trustee.
Your employees may make a claim for unpaid wages and holiday pay, payment in place of notice, and redundancy. Theyll make this claim to the National Insurance Fund, or the money may be claimed in the bankruptcy process.
You can start trading again, but youll have to follow certain rules.
How Do I Declare Myself Bankrupt
If you want to declare yourself bankrupt, rather than being declared bankrupt, it is only possible to apply for bankruptcy online. You have to fill out a form on the governments website.
Going bankrupt will cost £680 in England and Wales. In order to fill out the form, you will need information about your income, the cost of your outgoings and your debt.
How Does Bankruptcy Work
When you’re declared bankrupt, the value of your possessions is usually shared out among those you owe money to. This can include your house, car, leisure equipment and jewellery â everything except the essentials. Depending on your income, you’ll also be asked to make payments towards your debt for up to three years.
Sounds gloomy, but there’s a silver lining. Once you’re declared bankrupt, you won’t have the pressure of dealing with creditors anymore. Lenders will also have to stop most types of court action against you. And, most relieving of all, you will usually be ‘discharged’ â in other words, freed from your debts â after one year.
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How To Keep The Benefit Of Your Life Insurance Policy After Going Bankrupt
The simplest way to protect the future benefit from your life insurance policy is to buy back your interest from the Official Receiver. You can do this as soon as you go Bankrupt.
You will be required to pay a standard fee of £50 per policy. A letter will then be sent to you from the OR confirming that they have no further interest in the policy and any future payout should go to the named beneficiaries.
After you buy back the interest in your policy you must continue to pay the ongoing monthly premiums. You will be allowed to include a budget for this in your living expenses as long as they are not unreasonably high.
Even after you buy back the interest in a life policy if you die before you are discharged any benefit paid will still go to the Official Receiver under the rule of After Acquired Property .
How Can I Improve My Credit Rating After Bankruptcy
As well as being public knowledge via The Gazette and the Insolvency Register, it will also impact your Credit Rating.
- Order a statutory credit report from one of the three main credit reference agencies
- You have the option to add a summary in your report giving a reason for going into debt . It may help by updating this
- Update all personal details on your credit profile
- Register for the electoral roll at your current address
- In the longer-term, you will need to prove to lenders and borrowers that you can manage your money responsibly. You can then build up your credit profile by using and repaying credit slowly and responsibly over some time.
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Rejection Of Car Lease
If a debtor wishes to get out of the lease and turn in the car, rejection of the lease under either chapter 7 or chapter 13 is an option. This rejection ends liability on the lease. The balance owed on the lease becomes a general unsecured claim in the bankruptcy case, which will be normally wiped out by the bankruptcy discharge. The lease claim would receive payment, if at all, on a proportional basis with other unsecured creditors, such as credit card lenders. The debtor will lose possession of the car with rejection of the lease.
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What Happens To Bank Accounts And Credit Cards
When you have been declared bankrupt, you will lose control of your bank accounts and credit cards. Your bank accounts and credit card accounts will be frozen particularly in the case of a large, overdrawn account. This is also likely to be the case with any active cards and accounts you have with stores. While your bank accounts will be frozen, you will, however, be able to access some of your money in order to buy food and other essential items, as well as pay household bills.
For those that have a joint account with a partner who hasnt been declared bankrupt, it is still possible to access your partners money. Your debt is yours alone.
What Happens If A Limited Company Is Liquidated
When a company is liquidated, a licensed insolvency practitioner takes control of the company, realises its assets, and distributes the funds to creditors. Because the company is a separate legal entity from its directors, you are protected from personal liability unless certain circumstances arise.
If you have provided personal guarantees for business borrowing, this can also lead to you being liable for the outstanding sum, for instance. During the liquidation process the office-holder carries out investigations into the companyâs decline leading up to insolvency, and reports their findings to the Secretary of State.
But limited company bankruptcy does not necessarily mean the business is doomed to failure. Depending on the financial position of the company and its likely future viability, there may be options available to rescue the company and bring it back from the brink of insolvency.
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How Your Creditors Are Paid
The official receiver will take control of your assets unless an insolvency practitioner is appointed. An insolvency practitioner is usually an accountant or solicitor.
The person who takes control of your assets is known as the trustee. The law says you must cooperate fully with them.
The trustee will sell your assets and tell the creditors how the money will be shared. Creditors must then make a formal claim. You cant make payments directly.
If you have assets, money from the sale of these will be used to pay the costs of the bankruptcy process before creditors are paid. If your case is administered by the official receiver the following fees will all be deducted from the money realised:
- an administration fee of £1,990 if you applied for your own bankruptcy or £2,775 if someone else applied
- a general fee of £6,000
- 15% of the total value of assets realised
- a fee charged at an hourly rate where money is paid to creditors
If there are insufficient assets in your case the official receiver will still process your bankruptcy.
Next, money will be used for:
- certain debts in relation to employees, if you had any
- your other creditors
- interest on all debts
Any money left over will be returned to you. If everyone is paid in full you can apply to have your bankruptcy cancelled .
Being Discharged From Bankruptcy
When a debtor receives a discharge order, they are no longer legally required to pay the debts specified in the order. What’s more, any creditor listed on the discharge order cannot legally undertake any type of collection activity against the debtor once the discharge order is in force.
However, not all debts qualify to be discharged. Some of these include tax claims, anything that was not listed by the debtor, child support or alimony payments, personal injury debts, and debts to the government. In addition, any secured creditor can still enforce a lien against property owned by the debtor, provided that the lien is still valid.
Debtors do not necessarily have the right to a discharge. When a petition for bankruptcy has been filed in court, creditors receive a notice and can object if they choose to do so. If they do, they will need to file a complaint in the court before the deadline. This leads to the filing of an adversary proceeding to recover money owed or enforce a lien.
The discharge from Chapter 7 is usually granted about four months after the debtor files to petition for bankruptcy. For any other type of bankruptcy, the discharge can occur when it becomes practical.
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What Is The Bankruptcy Process
Apply for Bankruptcy
- You can apply for Bankruptcy online via the Government website, or youll receive a copy of the Petition if someone else has applied to make you bankrupt.
Get a decision
- The application usually takes 28 days to get a decision but can take slightly longer. The adjudicator will either reject the application or make a bankruptcy order. If the application is rejected you can appeal.
Co-operate with the Official Receiver / Trustee
- Once your application is approved you will have an interview with the Official Receiver. You will need to give them detailed information on your Statement of Affairs including assets, finances, income and living expenses. The more organised you are, the easier the process will be. If you dont attend the interview or cooperate with the Official Receiver, your bankruptcy will extend beyond the 12 months.
All Bank Accounts will be immediately Frozen
- It may be an idea to open a new basic bank account, although some banks may not open any type of account to a bankrupt.
Payment of Creditors
Your Bankruptcy is Discharged
- Your Bankruptcy will normally be discharged after 12 months. They will bring an end to all the restrictions and release you from most of the debts when the initial bankruptcy order was made. Your bankruptcy can be extended if you didnt cooperate with the Trustee.
What Happens To Your Assets After Discharge
Assets that are part of the bankruptcy stay under the trustees control when your bankruptcy ends. It can take time for all assets to be dealt with.
You must keep making any payments agreed under an IPA or IPO.
Your family home
If your family home has not been dealt with 3 years after the bankruptcy order, the interest may be given back to you.
If the interest in your family home is returned to you, the Land Registry will be told that the property is no longer part of your bankruptcy estate. The trustee will send notice to the Land Registry and the restrictions will be removed.
Your business
The restrictions on your business end when bankruptcy ends, unless the official receiver feels youve been dishonest. They can then apply to extend the restrictions
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Should I Declare Bankruptcy
If you are considering bankruptcy, you must get advice and weigh up all the advantages and disadvantages. You can speak to an independent and free debt advisor such as National Debtline or the Citizens Advice Bureau. Alternatively, you can seek formal and paid advice from a professional such as a solicitor, insolvency practitioner, financial advisor your accountant.
Exceptions To Payment Rules
There are some exceptions to the payment rules. You can make direct payments for:
- secured creditors, like a mortgage lender
- debts which are not included in the bankruptcy , these are called non-provable debts
- money owed after 19 March 2012 to the Department for Work and Pensions for budgeting or crisis loans
You must keep paying rent and any new debts after the bankruptcy. You may not need to pay bills that are unpaid at the date of your bankruptcy order. You may have to pay a deposit for future supplies of gas, electricity or other utilities. Or your utility accounts may be transferred to a spouse or partner.
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How Long Bankruptcy Lasts For
Bankruptcy normally lasts for one year. After this time, you’ll be ‘discharged’ from your bankruptcy regardless of how much you still owe.
Your discharge could happen earlier if you co-operate fully with the Official Receiver. In some cases and if you’ve behaved irresponsibly , bankruptcy can last for more than one year.
What Is A Trustee And What Is A Trustees Role
A Licensed Insolvency Trustee is the only professional who can administer a bankruptcy in Canada.
Licensed Insolvency Trustees are federally licensed and regulated by the Office of The Superintendent of Bankruptcy. Trustee fees are regulated under the Bankruptcy and Insolvency Act and are moderate, so the cost of bankruptcy is tends to be reasonable.
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The Work Doesnt Stop When You Get A Credit Card
With your new card, you should focus on improving your credit score so you can eventually qualify for better credit cards and get more favorable rates on other types of loans, like car loans, mortgages or student loan payments.
Make sure to pay your bills on time, every month, as thats the single biggest factor affecting your score, accounting for approximately 35% of your FICO credit score. The amount of total credit you use as a percentage of your credit limit also weighs in at 30% of your score, making it a worthy goal to try to keep your low.
You may also want to consider using a program like Experian Boost, a free program which counts your payment behavior from your linked checking account that you use to pay your utility, cell phone and video streaming media plans. Or use it in conjunction with American Express free Score Goals program, which maps out a blueprint of credit-building actions to help you achieve a better credit profile over time.
Assumption Under Chapter 7
Individual debtors are permitted to assume personal property leases, such as those for cars, in chapter 7. The debtor may be required to cure any past-due balance in order to assume the lease. To assume a lease, a debtor must follow proper procedures in a timely manner, so it is important that debtor communicate his or her desires to his or her bankruptcy attorney.
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What Happens When You Go Bankrupt
If the adjudicator makes you bankrupt:
- youll receive a copy of the bankruptcy order and may be interviewed about your situation
- your assets can be used to pay your debts
- youll have to follow the bankruptcy restrictions
- your name and details will be published in the Individual Insolvency Register
You can apply to have your address removed from the Individual Insolvency Register if publishing it will put you at risk of violence. This will not affect your bankruptcy.
After 12 months youre usually released from your bankruptcy restrictions and debts. Assets that were part of your estate during the bankruptcy period can still be used to pay your debts.
You might be able to cancel your bankruptcy before youre discharged.
Bankruptcy only applies to individuals. Find out what your options are if your limited company cannot pay its creditors.
Are My Personal Assets Safe During Bankruptcy
When filing for bankruptcy, you must consider your personal assets. As part of the bankruptcy order, money must be raised in an attempt to repay your creditors and recoup as much as possible. Due to this, personal bankruptcy may involve the sale of your assets. In this article, we will outline what assets are likely to be sold when declaring personal bankruptcy, and what that means for life after the insolvency procedure.
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What If Estate Payments Arent Made Until After The Bankruptcy Order Has Been Discharged
Bankruptcy orders usually stay in place for a period of one year, though they can last for longer. The process of administering an estate and having probate granted can take anything from a few months to a few years.
It would be perfectly possible for a testator to die before or during the period where their beneficiary has been declared bankrupt but for the beneficiary to have been discharged from bankruptcy before probate is granted and any payments are ready to be made.
However, this doesnt mean that the beneficiary would therefore be able to receive their inheritance.
Can I Be Made Bankrupt
The minimum level of debt for which someone who you owe money can force you into bankruptcy is £5,000.
The process of being made bankrupt is different.
But high street lenders rarely use this option and will prefer to work with you to find another way to pay off your debts.
You can find out more about what happens if someone tires to make you bankrupt on the GOV.UK website
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Is There Any Way To Avoid The Or Taking My Inheritance
Normally if you inherit money or assets and you would rather it went to someone else, you can use a Deed of Variation to arrange this. But you cant use this to avoid the OR getting the money. You can only sign the Deed of Variation if you are due to get the money, but your bankruptcy means that effectively the money isnt yours so you cant pass it on to anyone else.
If you want to ensure the OR wont get the money, the only way is to suggest to the person leaving the money that they change their will to leave it to someone else, for example to your children, or a sibling. More complicated possibilities involving trusts could be set up, but these can be expensive. If there is a lot of money involved, the person should to talk to a solicitor who has experience in these matters.