Bankruptcy
Bankruptcy is one way for individuals to deal with debts they cannot pay.

What You Need To Know
What Is Bankruptcy?
- An individual can make themselves bankrupt by submitting an online application to the Insolvency Service.
- A creditor owed at least £5,000 can petition for an individual’s bankruptcy by serving a petition on the debtor which may result in a Bankruptcy Order being made in Court.
- Following the making of an order the Official Receiver, a Civil Servant, is automatically appointed to act as Trustee in Bankruptcy.
- An Insolvency Practitioner from a private practise may subsequently be appointed to take on the appointment, possibly at the request of creditors.
- All the debtor’s assets “vest” in the Trustee.
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Tough Choices
What Are The Advantages Of Bankruptcy?
- The individual’s debts are written off and no interest is payable.
- Automatic discharge after 12 months.
- Creditor’s approval or agreement is not required, unlike with an IVA.
The Downside
What Are The Disadvantages Of Bankruptcy?
- It involves the sale of any valuable assets, potentially including the matrimonial home.
- It may result in a 3 year Income Payment Order.
- The automatic discharge after 12 months may be suspended if there is a lack of cooperation with the Trustee in Bankruptcy.
- During the period of bankruptcy there are certain restrictions including not being able to act as a Director, incur levels of credit as set down in statute, carry on in certain professional positions etc.
- High costs that result in very low returns to creditors.
- Certain debts are not included, such as Student Loans, Court Fines and debts owed under family court proceedings.
- Seriously affected credit rating.
