• How long will I be bankrupt for?
• How much will I pay each month?
• Will I lose my home, car or personal belongings?
• Is anybody going to come to my home?
• Which debts are included in a Bankruptcy?
• What other restrictions are there on a Bankrupt person?
• How long does it take to set up a Bankruptcy?
• What happens after the 3 years of my Bankruptcy?
• My bank is a creditor; will I be allowed a bank account?
• Can I still run a business while in a Bankruptcy?
• Who knows that I have a Bankruptcy – is it made public?
• What will happen to credit file whilst in Bankruptcy?

The responsibility for paying your debts is taken away from you by the Court.

Provided that you cooperate fully with the supervisor of your bankruptcy, you will be bankrupt for 12 months. However you will (if you can afford to) make payments to your creditors for a total of 3 years form when you are made bankrupt.

In some extreme cases, where it is felt you have acted culpably, recklessly or dishonestly then you may be subject to a Bankruptcy Restriction Order (BRO) for between 2-15 years.

You will only pay what you can afford each month. The court will calculate this figure when you apply for your bankruptcy.

Basically you pay what is called your ‘Disposable Income’ – that is the money you have left after you have paid for all your essential and reasonable living costs.

You are appointed an official receiver, who supervises your bankruptcy monitors what you can afford to pay over the 3 years.  

You will normally be able to keep reasonable personal items and household goods such as furniture and electrical goods as long as their value is not greater than the cost of their reasonable replacement. However, you will be expected to sell valuable assets such as antiques and expensive vehicles.

As a bankrupt, your title to any house you own or are paying a mortgage on will be passed to the Court. As such, ownership of any equity that you have personally in the property will pass to the Court. The Court will want to realise such equity for the benefit of your creditors.

This means that either you will need a third party to make an offer to the Court to buy out your equity or the Court will force the sale of the property to release the equity. If your husband, wife or children are living with you, it may be possible to put off a sale until the end of the first year of your bankruptcy to give time for other housing arrangements to be made. Your spouse or any other interested party would be encouraged to take legal advice about the home as soon as possible.  

If your house has no releaseable equity, or is worth less than the secured debt you have it is possible that you may end up keeping it as selling would not pay anything to the creditors. This is never guaranteed, but it is possible.  

The Trustee does have the power to investigate if he feels there may be additional assets that could be sold to pay more of the money back to your creditors.

In practice it is very unlikely that someone will come to your home.

All unsecured debts are included in a bankruptcy:

• Credit Cards
• Personal Loans
• Catalogue Debts
• Store Cards
• Overdrafts
• Student Loans
• Outstanding balances after home or vehicle repossession
• Business loans for which the client is personally responsible
• Inland Revenue / VAT debts
• Utility bill arrears
• Council tax

The only debts that do survive bankruptcy and remain your responsibility after discharge are Matrimonial, criminal and student debt.

• You cannot act as a company director
• Self employed people cannot trade in any other name than their own
• You cannot obtain credit of more than £500 without disclosing your status as a bankrupt.
• There are restrictions on some professions that involve the handling of money or managing accounts.

Once you have completed the application which you get from your local court, you would need to attend court on the date they provide.

This varies depending on how busy the courts are but can be completed within a month if all your paperwork is presented and the application form filled out correctly.

You will need to open a new bank account and you will be allowed one.

You will need a basic account only that has no overdraft facility. Every bank has a basic account now, so you will be able to get one.

After the 3 years are completed, your remaining debt is written off and you will be debt free. You can start to repair your credit rating in the following years and will eventually be able to borrow money even for a mortgage.

We would of course advise you to be very cautious about borrowing money, ensuring that the repayments are well within what you can afford each month.

You cannot be the managing director of a limited company, but can still trade as a sole trader.

If you are employed it is important to check your employment contract to see if your job is effected by being bankrupt. This can be the case if your job has any financial links, e.g. accountancy etc.

Your name and address is published in your local newspaper and the London Gazette. It is also recorded on the national insolvency register that is accessible to the public via the internet. However there would have to be a reason for someone to actively check the register.

Your employer is not formally notified of your bankruptcy, but it is possibler they may find out if the court applies for an attachment of earnings (where a payment is taken straight from your wages for your creditors). This is easily avoided however by making your monthly payments to your trustee when asked to do so.

Your bankruptcy is recorded on your credit file for 6 years from the date that you are discharged from bankruptcy (i.e. after 12 months). Obtaining credit after this time is harder at first obviously, but in time you can repair this and should be able to gain credit in the future.