A Bankruptcy Order is granted when it is proved to the Court that someone cannot pay their debt(s) – a minimum of £750. The application for the Order can be made by the individual or by a creditor owed money or by the Supervisor of a failed Individual Voluntary Arrangement.
The debtor can be made bankrupt whether they are aware of or refuse to acknowledge the proceedings. The first sign of a creditor bringing an action is a Bankruptcy Petition. Once advertised this petition will crystallise bank accounts effectively preventing any trading. If this happened – take advice immediately.
On a positive note, bankruptcy frees a debtor from debt and so has the chance to make a fresh start, subject to certain restrictions. The formal part of the process usually lasts 12 months.
There are disadvantages to bankruptcy though. Many of them affect the way that bankrupts can conduct their lives, as all assets vest (“belong”) immediately to the trustee and some people who have held positions of standing within the community are unable to maintain their jobs or position.
The effect of bankruptcy
A bankrupt cannot:
- obtain credit for over £250 without making the lender aware of the situation.
- use credit cards or open a bank or building society account.
- act as a company director, or take any part in the promotion, formation or management of a limited company without the permission of the Court.
- trade in any business under any other name unless all persons concerned are informed of the bankruptcy.
- practice as a Chartered Accountant or Lawyer.
- act as a Justice of the peace .
- take up an elective office. (e.g. Member of Parliament )
- work in fire brigade, police force etc
A first time bankrupt will be discharged within one year but an application for discharge can be made sooner than that.
Annulment – The Judge’s decision is not always final
It is possible to obtain an annulment (meaning in effect the bankruptcy order never happened at all) if all creditors are paid in full or if a proposal for an Individual Voluntary Arrangement is put in place.
Gibson Hewitt is happy to advise anyone in such a situation. We have a great deal of experience of rescuing people in such cases. Remember, the initial consultation is free.
For more information call us on 01932 336149 or click here to read The Insolvency Services guide to Bankruptcy