If your debts are out of control and you're thinking about going bankrupt, you'll need to know exactly what happens and when you can expect to be debt-free.
Petitioning for Bankruptcy
The first step is to petition for bankruptcy at a court. In order to do this, you'll need to demonstrate that your debts are unmanageable and are worth more than your assets. You'll also need to owe a minimum of Â£750 for the court to accept your application.
You can fill in the forms with the help of a debt management professional and pay the relevant fees.
Once your petition has been accepted at your local court with insolvency jurisdiction, your financial affairs will be investigated. This investigation is carried out by the Official Receiver's office and will cover the five-year period prior to the date of your bankruptcy application.
In the process of becoming bankrupt, your substantial assets can be sold to raise money. You will also have to inform the Official Receiver if your income increases. Any creditors that are owed money will have to stop contacting you.
Once bankrupt, you will find it very difficult to obtain credit.
If you do manage to borrow money from someone while you are bankrupt, you must inform them of your situation, and you're not allowed to borrow more than Â£500.
You also won't be able to continue to run a business without disclosing your bankruptcy, and you'll be banned from acting as a company director.
Most banks will give you a basic bank account without credit facilities so that you can continue to receive your wages and pay your bills.
You'll be discharged from bankruptcy after one year. This is normally automatic. On this date, your debts disappear, but you'll still have to liaise with the Official Receiver's office and continue to pay any Income Payments Order or Income Payment Agreement for the three years.
The Official Receiver can ask a court to suspend your discharge if you haven't complied with their requests.
When you're discharged, you will probably still have problems getting credit. Bankruptcy stays on your credit report for six years.
Need More Bankruptcy Information?
Bankruptcy isn't the only solution when you have problem debts. Depending on the value of your assets, the amount you owe and your personal circumstances, there may be a different route to becoming debt-free that will be more suitable.
To begin the process of dealing with your debt, get bankruptcy advice from Varden Nuttall. We'll help you to decide whether bankruptcy is the right course of action for you.