Invocas Financial

Subject to certain exemptions, bankruptcy means that the assets you own are sold and the money is then used to pay as much as possible to your creditors. The assets will be sold by the Official Receiver or an Insolvency Practitioner, also known as your 'Trustee in Bankruptcy'.

Under a personal bankruptcy ruling, you will be allowed to keep certain assets including:

• Everyday household contents
• The benefit of a residential tenancy
• A modest motor vehicle
• Any tools you need to pursue your trade
• Any money you have in a pension fund. If the fund is large or if you are likely to be taking the benefits of the pension fund in the next few years, you should get independent legal advice

Bankruptcy allows you to clear your debts completely. However, it should be seen as a last resort and our debt advisers will take you through the other options which don't have the same severe penalties before advising that bankruptcy is the only solution.

The process in the UK is quite straightforward, although due to the seriousness of bankruptcy, it is vital you understand the process you'll go through.

Firstly, you must complete the relevant bankruptcy forms and pay your fee. Proceedings can begin when these forms have been submitted to the bankruptcy clerk within your local County Court.

Secondly, an appointment will be arranged by the bankruptcy clerk for a hearing. When this happens, the court will either:

• Postpone proceedings to give the court time to gather more information and another date will be set
• Appoint an Insolvency Practitioner if the court thinks an IVA would be a better solution
• Dismiss your petition
• Accept your petition

In most cases, bankruptcy will end after 1 year. It could even be sooner if the Official Receiver decides to close his file early. You are then considered debt-free and your creditors can make no further claims against you.

However, there are some exceptions. You may still have to pay any lump sum order made against you, for example, in divorce proceedings or any unpaid court fines.

Even if some of your assets remain unsold after the end of your bankruptcy, they will still remain available to your creditors and could be sold. The existence of your bankruptcy will remain on record at the Land Registry and with credit reference agencies.

If you come into any money during the bankruptcy, for example, an inheritance or a lottery win, that will become available to your creditors. In addition, if you have any surplus income above the needs of yourself and any dependants you have, the court may order you to make contributions to your creditors for up to 3 years.

You will have to pay £450 towards the costs of administering your bankruptcy and in most cases, you will pay the court fee of £150. In some circumstances the court fee may be waived (e.g. if you are on income support) but the court will advise if you are exempt. You will also have to pay a fee of £12 to swear the statement of affairs in the High Court or before a solicitor, however, in a County Court, there is no charge for this.

If you are a married couple and you are both applying for bankruptcy, you will each have to pay separate fees. If you were a business in partnership, each partner will have to pay separate fees.

You may have to pay part of your salary to your Trustee in Bankruptcy. The only payment you would be required to make would be from the extra income you had left over after an income and expenditure check had been conducted.

We've highlighted the consequences you should be aware of:

• Any valuable assets that you own will usually have to be sold
• You may struggle to obtain credit in the future and your credit rating can be affected for many years
• Your bankruptcy will be advertised in your local paper
• You are not permitted to start up or be involved in the day-to-day management of a limited company
• You cannot act as a Member of Parliament, and there are certain other restrictions, for example acting as a member of a local council or school board, etc.
• You may not practise as a chartered accountant or a lawyer, or act as a Justice of the Peace
• Any hire purchase agreements that you have may have a clause which automatically terminates them if you become bankrupt
• A fee is usually payable with your application

You would have to surrender all of your valuable assets to a Trustee and under bankruptcy legislation the Trustee would then be permitted to release any available equity from them.

Provided they were not valuable, you would be allowed to keep items that were necessary for work, for example, books or a vehicle. Your Trustee will advise you on the assets that would need to be sold.

A Trustee in a bankruptcy will be interested in assets such as:

• Any equity in your property
• Savings, including shares, premium bonds or endowments
• A vehicle with a high value. However, you may be permitted to buy a more modest vehicle at a lower cost
• Any money from surplus income

It's important to note that bankruptcy can mean losing all your valuable assets (including your home) to release equity in order to distribute it amongst your creditors.

• Bankruptcy Orders in the UK are advertised in a publication called the London Gazette. Most banks, building societies and other financial institutions subscribe to it
• Your details will be held on the UK bankruptcy register which can be viewed online
• Details of your bankruptcy will be advertised in your local paper
• Credit referencing agencies will also be aware of your bankruptcy, which will make getting credit difficult once you have been declared bankrupt

If you petition for bankruptcy and have equity in your property it may have to be sold, even if it is jointly owned with someone else.

Being declared bankrupt may affect your current employment and chances of gaining employment in the future. If you are a member of a professional body, you may lose your membership. If you work for a financial institution, such as a bank, then your contract of employment may be terminated as result of your bankruptcy. We would encourage you to check your terms of employment for further information.

Bankruptcy also disqualifies you from holding public office and civil service positions, as well as being the director of a limited company.

If you have a bank account then this will be closed and any money in the account will be passed to your Trustee. If you have a joint account half of the funds will be taken by the Trustee.

Yes, however you may struggle to obtain a credit account if you have been declared bankrupt. As part of the bankruptcy process, your existing bank accounts will be frozen. However, you are legally entitled to a bank account and banks must accommodate for this.

Take the first step to turning your debt around. By completing our online enquiry form, we will advise whether we can help you with a debt solution and arrange a time to contact you to talk through the options.