How does bankruptcy work?
Bankruptcy proceedings
Bankruptcy is a legal process administered by the courts.
If you reach a point where bankruptcy appears to be an option, you should first take legal or financial advice because it need not be the only way to resolve your position. It is important to act as soon as you realise you have a problem with your debts, or it could be too late.
Once you have chosen the bankruptcy route, a bankruptcy order will be made against you by the courts, either at your request if you are voluntarily making yourself bankrupt, or at the request of a creditor to whom you owe £750 or more.
A fee is payable to the court, though some people may be exempt, and a deposit is payable in all cases towards the administration of your bankruptcy.
If you are a married couple petitioning for bankruptcy both of you will have to pay these fees.
The Official Receiver will be responsible for administering your bankruptcy unless an insolvency practitioner sometimes referred to as an IP is appointed.
He/she will be your trustee and will find out all he can about your finances – what you own and what you owe – and repay as much as possible and as fairly as possible, within certain guidelines.
What happens?
If you’ve taken professional advice and decided that bankruptcy is the way for you to resolve your indebtedness, you complete a form, which asks the court to make you bankrupt and includes your reason for requesting bankruptcy.
You will also have to complete a statement of affairs, detailing what you own and what you owe and to whom.
Your petition will then be heard by the court. Once the order has been made against you, your creditors, the people you owe money to, can no longer pursue you to settle the debt. Repayment becomes the responsibility of the Trustee appointed by the court to administer your bankruptcy.
