Bankruptcy is a very serious course of action and a decision to file for bankruptcy should not be taken lightly. It may be the most sensible course of action, particularly if you have no funds to propose a repayment arrangement with your creditors.

Whether your creditors have petitioned for your bankruptcy or you're considering this route, we can help you at every step and provide you with expert, impartial advice.

The objective of bankruptcy is to completely wind up your financial affairs and to sell your assets to raise funds in order to pay off as much of your debt as possible, and essentially ‘start again’.

Certain assets are excluded from bankruptcy and you will be allowed to keep: 

• Ordinary household contents
• A modest car 
• A residential tenancy
• Items needed for your trade or employment such as tools
• Money you hold in pension funds
  

What will happen to my home?

You will not necessarily loose your house as there are special rules regarding your home. Generally speaking, if you have equity in a house (i.e. it has a value in excess of any mortgages on the property), even if it is jointly owned, it may have to be sold. 

However, if you wish to remain living in it, there are ways to avoid a forced sale of the property, for example by selling your share to a friend or relative. 

How long does bankruptcy last?

New legislation which came into force in April 2004 reduced the maximum term for bankruptcy from 3 years to 12 months. Providing you have not been made bankrupt before, your bankruptcy will end (you will be ‘discharged’) after 12 months. At the point you are discharged you will be free from debt and no further action can be brought by your creditors, although you may still have to make payments from your income for a further 2 years. There are certain exceptions to this, for example you may still have to pay any lump sum order made against you in divorce proceedings and pay unpaid court fines. Since 1st September 2004 all outstanding student loans cannot be claimed in bankruptcy.

Consequences of bankruptcy

• You may be ordered to pay contributions from your income for up to 3 years at a rate determined by the Court or the Official Receiver.
• You will be required to disclose your bankruptcy status for certain transactions e.g. opening a bank account, obtaining credit, applying for certain jobs and often this disclosure will present difficulties.
• Your bankruptcy will publicised in a local newspaper
• The costs of bankruptcy are normally higher than the costs of an IVA
• A professionally qualified person such as a solicitor or accountant may have their practising certificate suspended.
• If you are a sole trader your business will normally be closed and if you are a company director you will need to resign from your position.
• A Bankruptcy Order is registered with credit reference agencies for at least six years

For a number of people bankruptcy is nevertheless a positive way to resolve debt problems. 

Bankruptcy has different consequences for different people, so it is important to seek expert advice from a licensed Insolvency Practitioner as to whether it is the right course of action or whether an alternative procedure such as an IVA would be more appropriate.