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Our Bankruptcy experts have answered your most frequently asked questions below. Cant find what you are looking for? You can call us NOW on Freephone 0800 7710 073 for free impartial and confidential advice.

What happens after Bankruptcy?

Once the Bankruptcy Order has been made the Official Receiver and his staff will be responsible initially for dealing with your Bankruptcy. The Official Receiver is a civil servant who works for the Government's Insolvency Service. If you have any assets of value the Bankruptcy Order means that these are automatically transferred to the Official Receiver once the Bankruptcy Order has been made. The Official Receiver will usually arrange for a licensed Insolvency Practitioner to be appointed to act as your Trustee in Bankruptcy to collect in your assets for the purposes of paying your debts and the costs of the Bankruptcy.

What does the Official Receiver do?

The Official Receiver will investigate how you have conducted your financial affairs in the period before the making of the Bankruptcy Order. Matters to be investigated include for example whether you have transferred any assets or cash to third parties before the Bankruptcy Order was made with a view to avoiding paying your debts. The investigation will also focus on whether you have paid any debts such as debts owed to relatives or business associates in preference to your remaining creditors.

Is my Bankruptcy made publicly available?

While Bankruptcy Orders are no longer advertised in local newspapers you need to be aware that details of the Bankruptcy will be published on the public register and this information will be available to anyone who chooses to search the register including for example your employer or a prospective employer.

Which Debts are written off after Bankruptcy?

The benefit to you of being made bankrupt is that all your unsecured debts are written off with the exception of criminal fines, child maintenance arrears and TV licence non payment. The Official Receiver and your Trustee in Bankruptcy will deal with all your unsecured creditors. This means that all future correspondence and telephone calls with your creditors will be handled by the Official Receiver or your Trustee in Bankruptcy.

Because your unsecured debts are written off Bankruptcy can be seen as a way of starting again financially. You will not be burdened any longer with the anxiety and worry of being unable to pay your debts.

Will I have to pay anything from my income?

If you have any surplus income remaining after payment of reasonable living costs the Official Receiver can require you to pay contributions from your surplus income for up to 3 years following the making of the Bankruptcy Order.

What happens to my assets after Bankruptcy?

Typically many people who are made bankrupt own a property which may be subject to a mortgage. If there is no equity in the property i.e. there is unlikely to be any surplus remaining should the property be sold then the Official Receiver will agree to release his claim against the property provided you pay the legal fees for the release to be put in place.

If you own a property which could be sold with your share of the proceeds being used to contribute to payment of your debts the Official Receiver or your Trustee in Bankruptcy will be obliged to realise your share of the property. If you are married then your wife will be able to continue living in the property without it being sold but only for a maximum of 1 year following the Bankruptcy Order.

The Official Receiver or your Trustee in Bankruptcy will only require you to sell your house as a last resort. They will allow time for you to try and obtain funds from friends or relatives of other third parties if it is practical for you to do this rather than forcing a sale of your house.

As with your house if you own any other assets these automatically belong to the Official Receiver / your Trustee in Bankruptcy once the Bankruptcy Order has been made. This means that assets such as cash in your bank account, shares or investments, cars etc will all have to be sold to contribute to paying your debts. You will be allowed to retain a modest car even after the Bankruptcy Order has been made and you will not be required to surrender personal possessions such as jewellery or household furniture and contents.

Will my pension be included in my Bankruptcy?

Your pension fund will normally be excluded from your Bankruptcy which means that even though you are Bankrupt your pension will not be affected and any contributions you have made to your pension scheme over the years will be safe. The Government has taken steps to protect the interests of creditors and prevent abuse of the system. If you have made unusually large contributions to your pension in the period leading up to the making of the Bankruptcy Order these payments are at risk of being repaid to your Trustee in Bankruptcy and in the most serious cases you could be faced with a criminal investigation.

It is also important to bear in mind that if you draw a lump sum from your pension or you are receiving pension payments these funds could be claimed by your Trustee in Bankruptcy. There is also a risk that the Trustee in Bankruptcy may seek to claim the amount you are able to draw as a lump sum payment from your pension even though this seems to be against the spirit of the legislation exempting pensions from Bankruptcy.

What can I not do after Bankruptcy?

Unless the Official Receiver finds that you have been dishonest or reckless and in breach of the provisions of the Insolvency Act you can expect to be 'discharged' from Bankruptcy after 12 months.  During the period you are Bankrupt you will be subject to certain restrictions. This means you can't do any of the following:
  • Borrow more than £500 from a lender without telling the lender you are bankrupt
  • Be a company director
  • Buy a council house using the 'right to buy' scheme
  • Change the name of your business if you are self employed
  • Act as a Trustee of a registered charity or Justice of the Peace

You will need the consent of the Official Receiver to continue to operate a bank account or to open a new bank account. While these are the legal restrictions applicable to Bankruptcy there can be other consequences of being made Bankrupt.

Certain employers may not allow you to be an employee if you are bankrupt or even if you have been bankrupt in the recent past.  Some professional membership bodies do not allow people to remain as members if they have been made bankrupt. If you work for any of the following or you are considering applying to work for any of them you should check whether bankruptcy may be a problem for you:
  • Armed forces
  • The Police
  • Pub Licensee
  • Jobs in regulated Financial Services organisations such as e.g financial adviser, mortgage broker, stock broker,
  • Accountants
  • Estate agency or property letting agency
  • Any job involving the handling of large amounts of cash such as banking, payroll or security.

Your credit rating will also clearly be affected by the making of a bankruptcy order as lenders will be naturally cautious about lending to someone who has defaulted on payment of their debts in the recent past.

Can I open and use a bank account after Bankruptcy?

It is likely you will need to open a new bank account after the Bankruptcy Order is made as the bank account you were using until the making of the Bankruptcy Order will usually be closed. It can sometimes be a time consuming process to arrange for a new bank account to be opened and this can cause difficulties particularly if your employer will only pay your salary or wages by transferring funds into your bank account. Banks will only offer you a restricted form of bank account and of course you will be unlikely to be offered any form of credit facilities such as an overdraft, credit card or charge card.

What other options are available instead of Bankruptcy?

Bankruptcy is viewed by most people as a last resort for dealing with payment of their debts. If you are able to afford to pay a monthly contribution from your income after paying all your household expenses you may qualify for an Individual Voluntary Arrangement. Nowadays most creditors will look sympathetically at proposals for IVAs particularly as IVAs will almost certainly provide creditors with a better outcome than if you go bankrupt.

Dealing with financial problems is confusing and stressful. There are sources of free and impartial debt advice which we recommend you use before deciding on the course of action which is right for you. The Money Advice Service provides free and impartial money advice either in person or over the phone or online.

Contact Bennett Jones Bankruptcy Team Today!

You can call us NOW on Freephone 0800 7710 073 for free impartial and confidential advice provided by experienced bankruptcy professionals. Or fill out our Contact Form and we will get back to you.