Bankruptcy is an option individuals can choose if they have exhausted all other avenues and have no other way to pay for their debts
. A person claiming a first time bankruptcy will usually have their debts discharged about a year after the date of the bankruptcy order (or sometimes in less than one year).
Bankruptcy does have a stigma attached to it, and much has been said about it in the media, however, if someone has no other way to pay
their debts, it is a viable option.
Bankruptcy provides you with an opportunity to settle debts you otherwise are not able to pay.
Bankruptcy proceedings will:
1. Settle up your debts and provide you with a clean slate, with some restrictions on your credit.
2. Make sure what you can pay is distributed fairly to your creditors.
Individuals or companies can go bankrupt. There are different procedures involved for individual and organizational bankruptcy, but here we will deal with individual bankruptcy.
How do you become bankrupt?
There are three ways an individual becomes bankrupt:
# Voluntarily - Individual declares bankruptcy
# Involuntarily - The creditor declares the individual bankrupt (individual must owe the creditor a minimum of £750)
# The supervisor or anyone heeding an IVA
A bankruptcy order will proceed with or without your acknowledgement or refusal. The best thing for you to do is to fully cooperate with the proceedings. If you disagree and dispute the creditor's claims, do try and reach an agreement with them before the bankruptcy order goes to court. After the bankruptcy order has been decided, any action on your part now is difficult and costly. The Courts are in charge of making an official decision in bankruptcy cases, although the individual or creditor must initiate the proceedings. The worst thing you can do is ignore all notices.
A Trustee is then appointed to oversee the assets of the bankrupt individual. The Trustee will be the Official Receiver (a civil servant/officer of the Court) or a licensed Insolvency Practitioner. The appointed person becomes responsible for finding the individual's assets and resolving them, dispersing as much as possible to the creditors while staying within specific guidelines.
As soon as a bankruptcy order has been decided, creditors are no longer allowed to pursue you for payment. The Trustee now becomes responsible for the payment of your debt.
A reversal or annulment can be applied for if:
*the bankruptcy order was improperly filed, for instance proper steps were not taken
*the total bankruptcy debts and fees, including court fees, have been paid in full or the court is satisfied with repayment
*you have made an agreement called an Individual Voluntary Arrangement with your creditors to repay your debts however it has been agreed upon