Basic Bankruptcy Advice and Guide

If you haven't already had previous advice, it is highly recommended that you answer all of the questions on our Debt Options page which will help you decide which option to follow. You should carefully consider all options before deciding to continue further.

If you have any doubts, you should get full, independent, professional advice.

Resources

Guide to IPAs/IPOs including a Payment Order Calculator

Introduction
Some advantages of bankruptcy
Some disadvantages of bankruptcy
How are you made bankrupt?
How much does bankruptcy cost?
Possible help with bankruptcy costs
Official Receiver Interview
Income Payment Agreements and Orders (IPAs / IPOs)
When does my bankruptcy end?
Useful contacts and publications

Introduction

Bankruptcy can be the best option for dealing with debts in many cases allowing people to clear their debts and make a genuine stress free new start with their lives. It is a perfectly legitimate way of dealing with your debts and should always be considered along with all other options available.

There now seems to be much less stigma attached to bankruptcy with many people now choosing this route as a long term solution to their debt and financial problems.

Please note you should always seek proper advice on all your options from the Citizens Advice Bureau (CAB) or another recognised agency / professional before deciding on bankruptcy as a method of dealing with your debts as there are advantages, disadvantages and possible serious implications.

Some advantages of bankruptcy

Genuine fresh start with your debts legally written off.
Stress and pressure relieved because you no longer have to deal with creditors.
You are usually allowed to keep all your essential household goods etc.
Allowed a reasonable amount of money to live on.
In some cases you may be allowed to keep your car (depending on value) if you need it for work or if disabled (eg. DLA mobility scheme).
Discharged in one year or as little as six months in some cases.

Some disadvantages of bankruptcy

If you own your home or have any valuable assets both could be at serious risk of being sold to raise any equity or monies, however in some cases you may be able to keep your home (eg. negative equity or very small equity).
Your employment could be at risk in some professions (you would need to check your contract of employment).
If you own a business it is more than likely that the Official Receiver will close it down and dismiss your employees and sell off any assets.
Some details of your bankruptcy (eg. name and address) are recorded on the Insolvency Service Public Register and the London Gazette. In some cases bankruptcies can still be advertised for one week/day (usually in a small print section) in local newspapers.
You may be subject to a three year income payment agreement / order (IPA/IPO) (depending on circumstances).
A bankruptcy restriction order (BRO) may be applied to you the Official Receiver feels that you have been dishonest or blameworthy in some way or if you fail to co-operate with the Official Receiver.
Some debts are not written off in bankruptcy, for example court fines, student loans, CSA and some rent arrears (always check this area).
Bankruptcy orders are kept on credit files for six years and you cannot obtain credit of more than £500 without advising the creditor that you are bankrupt.

How are you made bankrupt?

Voluntary - You petition for bankruptcy yourself online.
Involuntary – By a creditor owed £5,000 or more.
The Supervisor or anyone bound by an Individual Voluntary Arrangement (IVA).*

* If you have problems with your IVA and / or feel that you may not have been properly advised before entering into it you may still be able to petition for bankruptcy yourself, however you should always obtain proper advice first.

Please note there is clear evidence of organisations and individuals contacting those who are bankrupt or subject to IVAs after obtaining their details from the Insolvency Service Register. It appears that some of these organisations and individuals are offering services and / or solutions (often with a fee or costs involved) that they claim would be beneficial to those already subject to bankruptcy or IVAs.

Our position regarding the above is that you should always contact your Insolvency Practitioner and / or seek independent, impartial advice from a recognised agency such as the Citizens Advice Bureau before making any decisions or committing yourself to any course of action.

How much does bankruptcy cost?

There are fees and costs to pay if you wish to petition for bankruptcy yourself, these are Official Receiver £550 and adjudicator fees of £130

Possible help with bankruptcy costs / fees

There are a number of charities that may help with bankruptcy costs and fees depending on eligibility (examples below).

Severn Trent Trust Fund and other water trusts
EDF Energy Trust
Royal British Legion
Some Trade Unions
- Trades Union Congress
- Union Finder from Worksmart
Turn2Us enables you to search for charities

Please note you will usually need the assistance of a recognised Debt and Money Advice Worker in completing applications relating to the above.

Official Receiver Interview

What happens when you are interviewed by the official receiver

In our experience bankrupt people are usually interviewed by an examiner over the phone which can be on your home phone or another designated number (some of our clients use the bureau office). However in more complicated cases and on other occasions bankrupt people may be asked to attend a face to face interview at the relevant Official Receivers Office.

After introducing themselves and explaining their role in your bankruptcy the examiner will normally confirm your personal details and go through your petition asking a number of questions relating to your bankruptcy (possible official receiver examiner basic question examples below).

Assets

Do you have a private pension?
Can you confirm the name of the pension company?
Do you own a car (or other vehicle) or have a financial responsibility for a car (whether in your name or on finance)?
Can you confirm the make, model and registration of the car, when it was it was bought and how much it cost?
What sort of journeys do you require the car for?
Does your partner have a car?

Unsecured creditors

(Catalogues, credit cards, loans, overdrafts etc)

Approximately when did you take the credit card out?
Was there a period of time when you was using the card more frequently, if so when and why?
What sort of things were you using the card to pay for?
Is the card in your sole name?
What is the limit on the card?
When did you take the loan out?
What was the loan for?
Is the loan in your sole name?

(Questions probably repeated for all credit cards, loans and similar questions for other unsecured creditors)

Employment and Income

Can you confirm who your employer is and the nature of your work?
What was/is your average take home pay?
Do you receive any other income / allowances / benefits / tax credits?
What do other people living with you (partners, non-dependants etc) contribute to the household income?
You state that the total household income is £xxxx per month, could you confirm that this is still the case?

Outgoings

Are the amounts stated the amounts you yourself pay or contribute to, or are they the total figures payable by thehousehold?
How much is the monthly rent / mortgage, how much do you pay yourself?
What proportion of the household outgoings do you contribute to?
You state a figure of £xxx for insurance, what sort of insurance is this? (car, house, life)
How long have you lived at you present address?

Property

How long have you lived at your present address?
Do you rent the property you currently live in?
What is the name and address of your landlord?
Do you own your home?
What is your home currently worth?
How much is outstanding on the property you own?
Does anyone else have an interest in the property you rent / own?
How much is the monthly rent / mortgage?
Have you disposed of / sold a property within the last 5 years, if yes can you give me the details?

Causes of bankruptcy etc

At what point do you consider that you began to struggle to sustain your credit payments and stay on top of your domestic commitments?
What factor / factors caused you financial problems to worsen?
You state that you first began struggling in August 200X..what is the significance of that date? what changed at that point?
Have you taken any formal advice and if so, from whom and when?
At what point did you consider bankruptcy as an option?
When did you decide to pursue bankruptcy?

The above questions are just loose guide basic examples to give some idea of the interview procedure with cases and questions being different depending on individual circumstances.

The Official Receiver will inform your creditors of your bankruptcy and send them a report on your financial situation. The Official Receiver will agree what will happen to any valuable assets you may or may not have and discuss with you if any Income Payment Agreement (IPA) may be relevant in your case.

It is our experience that the Official Receiver Examiners are polite, reassuring and helpful and are not there to judge you and our advice is that you should not worry and always try to answer the questions where you can and co-operate fully with the Official Receivers Office.

(For guidance purposes it is good practice to have a copies of your completed bankruptcy forms to hand at the time of your interview with the examiner / official reciever).

Income Payment Agreements and Orders (IPAs / IPOs)

When someone becomes bankrupt, the trustee will make an income and expenditure calculation as to whether the bankrupt person can afford to make any payments towards their bankruptcy debts in the form of an Income Payments Agreement / Order.

Income Payment Agreements and Orders usually last for a period of 3 years.

For further information, see our guide on IPAs/IPOs including a Payment Order Calculator.

When does my bankruptcy end?

When will my bankruptcy end?

You will normally be discharged from bankruptcy after one year or in some cases as early as 6 months, however if you have an IPA / IPO you will continue to pay for up to 3 years.

If you are subject to a Bankruptcy Restriction Order (BRO) or have agreed to a Bankruptcy Restrictions Undertaking (BRU) these will continue to run their course after your discharge (however these are relatively rare).

* If you have any problems or issues with the Official Receivers Office or need further advice contact the CAB or another suitable agency.

Bankruptcy Contacts and Publications

Insolvency Service Information and Publications

The following publications are available from the Insolvency Service website, which can be searched for specific information.

Guide to Bankruptcy
How to petition for your own bankruptcy
When will my bankruptcy end?
What will happen to my home?
What will happen to my bank account?
Can my bankruptcy be cancelled?
Individual Insolvency Register
What happens when you are interviewed by the OR?
What will happen to my pension?
Bankruptcy Restrictions Orders
Statutory Demands
Technical Section
- Case Help Manual: IPAs, IPOs, Family Home, Foreign Issues, Discharge Process, Pensions, etc.
- Technical Manual: In-depth O/R "best practice guide", dealing with bank accounts, advertising, assets including motor vehicles, property, pensions, etc.

Information on Bank Accounts

Citizens Advice: Accessing Your bank account after going bankrupt
Citizens Advice: Getting a Bank account
Moneysavingexpert: Basic Bank Accounts
Bild - Easy-to-read information about banking
Easy-to-read information about banking. It's been written specially for people with learning difficulties. It tells you about how to choose and open a bank account and how to use your bank account. It also explains some of the words used in banking.