The Effect of Bankruptcy on People’s Lives
Bankruptcy is effectively being in a financial status in which you are incapable to pay your debts. Bankruptcy makes possible you to make a new start financially, however your existing belongings e.g any monies in an account will be distributed proportionately between your creditors.
Becoming bankrupt has many implications for example having to give up any interest you may have in your home, shutting down of your business and dismissal of any employees.
You can be made bankrupt in one of two ways, firstly either by petitioning for your own bankruptcy, known as a ‘debtors petition’ or by one or more creditors who are owed more than £750.00 petitioning to make you bankrupt; this is known as a ‘creditors petition’.
If you disagree that you owe money to the petitioning creditor you must make it known straightaway and prior to any bankruptcy hearing, or it may be too late. It may dependent on your circumstances be possible to enter into a payment agreement with your creditors which allows you time to pay off your debts in a way manageable and affordable to you.
Upon a Petition being successful at Court, upon you being declared bankrupt your assets are held by the Official Receiver. The Official Receiver (or the Trustee in Bankruptcy) is required to take control of your assets and keep them secure until an Insolvency Practitioner is appointed. It is the job of the Insolvency Practitioner to then distribute your assets amongst your creditors.
As a bankrupt you you must inform the official receiver of your assets and those who you owe money to. you should give access to your assets to the official receiver, even funds obtained during your bankruptcy; for example if you have an increase in your income or inherit assets under a Will. Whilst in the state of bankruptcy, you must make sure you do not make payments to creditors direct or obtain credit of more than £500.00 (without first informing the person providing credit of your bankruptcy).
It is vital that you note that it is a criminal offence to be concerned with the above if you are an un-discharged bankrupt.
The period of bankruptcy is usually a maximum of 12 months, after this period you will be ‘discharged’. However this length may be reduced if the official receiver considers this as suitable and files a Notice with the Court. Alternatively the Official Receiver may apply to postpone the discharge if you are deemed to not have complied with your duties during your bankruptcy period.
Being a bankrupt seriously restricts your potential to handle your finances, and will have a greater effect on those who may be financially dependent on you, such as your spouse or young children. It is significant therefore that upon being aware you are in financial straits or are unable to manage your debts, you seek advice from a solicitor within this field of work.
