Personal bankruptcy is a legal status for people in dire financial circumstances and whose situation is unlikely to improve in the foreseeable future. This hence renders them practically incapable of settling all their dues within a realistic time frame.
Bankruptcy is a type of insolvency which only suits people who don’t have the means to settle their financial obligations within a reasonable duration of time. Any assets owned by the person, such as their home, will be sold off to settle the dues. This means that if the value of their assets exceeds the total amount they owe, bankruptcy wouldn’t be an ideal option in this case. The same also applies to people who are currently keeping up with regular payments, and have the means to afford to keep doing this in future.
When a person applies for bankruptcy, almost all their unsecured financial dues are written off. This enables them start off afresh. However, there are certain personal bankruptcy regulations which keep such people within certain constraints.
Personal Bankruptcy in the United Kingdom
Bankruptcy costs vary depending on where the applicant resides. In Wales and England, bankruptcy would set you back £705 in costs. This is comprised of a court fee amounting to £180 and a bankruptcy deposit of 525 pounds. In Northern Ireland, the bankruptcy deposit stands at £525. A £7 payment is also made to the solicitor and there’s also a £115 fee payable to the court, which means the costs sum up to £647.
People with a meagre income and those who receive benefits may have their court fees waived. This results in costs amounting to £525 and £532 in England/Wales and Northern Ireland respectively. The terms of the bankruptcy forbid creditors from continuing to charge interest. They also cannot contact the debtor or initiate any kind of legal action in an attempt to recover their monies.
Guidance on Personal Bankruptcy
Personal bankruptcy is a state that has significant repercussions. As such, one shouldn’t make any move towards this state before contacting a financial expert for advice on debt management. They can offer some confidential advice on debts for free and survey your situation in order to find the best solution for your case. The person could also use some financial tools available online to find out if personal bankruptcy would be the best option for them.
Filing for Bankruptcy
After making the decision to apply for bankruptcy, taking some advice and considering all the options, one is able to know if they meet the criteria. They’re also aware of the potential impact of doing this on their life in future and their career. There are certain steps one needs to take if they still want to pursue personal bankruptcy.
1. Proving Insolvency
Knowing that one is insolvent isn’t sufficient. They have to prove it, and there are a number of ways to do this. Such include when a creditor issues the person with a Charge for Payment and they leave it unpaid, the person signs a Trust Deed or IVA which is declined by their creditors, or they meet the criteria set for Low Income, Low Asset application for bankruptcy. They could also proceed if they have a Certificate of Bankruptcy from an accredited Insolvency practitioner or Money Adviser. This is issued upon review of the person’s financial paperwork and it’s concluded that they’re indeed insolvent.
2. Obtaining all the Forms
Before filling these forms, one needs to read several pages containing notes. They’re also required to have all their financial paperwork. This information is quite detailed. It would thus be worth it to start collecting it several days in advance in case the person needs to contact some lenders in order to obtain this information.
3. Substantiation and Payment
Every personal bankruptcy application has its own checklists to ensure that the person has cautiously considered every aspect and included the proof needed for the Accountants In Bankruptcy (AiB) to come up with a decision. Without this, the AiB cannot declare the person bankrupt. Everything should be checked to ensure that it’s signed and dated. Any missing details could result in delays or unprocessed applications.
Upon handing in the evidence, the person now has to pay the fees. This could be done before application, either in person at AiB, at a bank, or using an over-the-phone card payment. The receipt could be attached to the application, or the payment sent off with the documents using a postal order or cheque.
It’s also possible to pay this fee in instalments. Details of how to do this are included in the debtors guide on the AiB site and in the application pack as well. However, the fee has to be paid in full before the application can be sent. Credit card payments are also not accepted. People who are cannot afford the fee could find someone else to do so, or make small periodic payments then include all the receipts when sending the application.
4. Waiting for a Verdict
This doesn’t take long, as long as all forms are correctly filled in and the required information is provided. The confirmation could take less than a week.
5. Appointment of an Insolvency Practitioner
One could opt for this option by putting the details in their application. This person acts as a trustee who handles the administration of the bankruptcy. Alternatively, the AiB acts as the trustee to administer the bankruptcy themselves or appoints an Insolvency Practitioner to act on their behalf. This happens when the applicant fails to nominate a candidate.
Shortly following this, a meeting is arranged with the Insolvency Practioner so that all details can be reviewed. The next step involves valuation and disposal of assets where applicable. The IP informs the creditors within 60 days of the day of award of bankruptcy. After this, one doesn’t have to deal with them afterwards.
Going bankrupt is a big step to take and requires expert debt advice. If you’re considering bankruptcy, use our online Debt Calculator, which will provide you with the best solution to your debt problem in just 20 minutes.
There are other alternative to bankruptcy, such as an IVA (Individual Voluntary Arrangement) or a Scottish Trust Deed (for Scottish residents only). An IVA will allow you to legally write off a substantial portion of your debts as long as you make regular set payments for five years into your IVA plan. Protect yourself from the bankruptcy process today, see if you qualify for an IVA online with our free calculator.