Going Bankrupt and Debts Which Are Excluded

Here you can download our Going Bankrupt And Debts Which Are Excluded 5 Frequently Asked Questions booklet. An example of the useful information you can find in the booklet is featured below.


1. What Is A Bankruptcy Order?

A Bankruptcy Order is an order of court declaring that you are insolvent, which means that you are unable to pay the debt which the Bankruptcy Petition is based on. Insolvency is usually implied where your liabilities exceed your assets.

Once declared bankrupt, all of your personal assets and most of the debts that are claimed or may be claimed against you are consolidated into your “Bankruptcy Estate” which is then administered by an appointed officer of the Court. Following the making of a Bankruptcy Order, you are referred to as Bankrupt.

A Bankruptcy Order can be made upon your own request (commonly called a ‘petition’), which is often referred to as a Debtor’s Petition, or upon a similar petition being filed at Court by one of your unpaid creditors, which is often referred to as a Creditor’s Petition.

Once you are declared Bankrupt, your financial estate falls immediately within the authority of an officer of the Court who is usually the Official Receiver and who acts as receiver and manager of your estate. If you own any assets of value (for example a residential home) then an independent accountant (often referred to as an Insolvency Practitioner) may be appointed by the Secretary of State, or creditors, and upon appointment s/he will be referred to as your Trustee in Bankruptcy (“the Trustee”).

2. What Is The Effect Of Bankruptcy?

If you are declared Bankrupt your entire financial estate will immediately come under the control of the Official Receiver and, subsequently, the Trustee.

As a result, from the date of the Bankruptcy Order all of your assets – including money at bank, any money owed to you, any physical assets (such as your car), your home, any other property you own, any inheritance or trust income and any interest in business - will automatically vest in the Trustee. The Trustee will be responsible for selling all such assets with the final sum realised (once all assets have been sold) being used to pay the costs of the bankruptcy proceedings and then a payment to your creditors.

Similarly, upon being declared Bankrupt, most of the debts you owe will no longer be enforceable against you. The creditors, rather than writing to you, will be contacted by the Trustee who will deal with their claims against you.

You will normally have no further obligation to pay these creditors, although please see below for creditors who’s debts continue to be payable despite the making of a Bankruptcy Order.

3. What Other Effect Does Bankruptcy Have On Me?

In addition to the loss of control over your assets and the divorce from your debts, you will also be subject to a number of legal restrictions or requirements as a result of the onset of insolvency. For example, you may have to declare to any provider of credit (for example a credit card, store card or even credit offered in business) that you have been bankrupt. Your credit record will also reflect the bankruptcy and affect future borrowing.

You are prohibited from taking certain positions, for example you cannot act as a director, trustee and, if you are professionally qualified (for example as a solicitor, accountant etc.), then you may not be able to practice or may be required to practice under limited conditions.

In business, suppliers will be more cautious in supplying goods or services to someone who has been bankrupt and thus it may affect your ability to continue trading.

Following the making of the Bankruptcy Order, provided you have cooperated with the Official Receiver and the Trustee, you may then be discharged from Bankruptcy. This does not mean it ends, but that some of the above duties cease. Your assets and debts (subject to exempt debts described below) will continue to be collectable by the Trustee and the record of your Bankruptcy will remain, but otherwise at this point you have the opportunity to continue your life without the threat of such debts hanging over you.

4. Are All Of My Debts Written Off When A Bankruptcy Order Is Made?

Once a Bankruptcy Order has been made you can normally stop making payments to your creditors that pre-dated the date of the bankruptcy order, whilst still being able to keep your income for personal living expenses (although any surplus may have to be paid into the Bankruptcy estate).

However, not all debts are included in a bankruptcy estate and neither are they written off when a Bankruptcy Order is made. This means that a person who is declared Bankrupt may remain liable for the payment of certain debts even after they have been discharged from their Bankruptcy.



5. What Debts Can Continue To Be Claimed Against Me?

Should you require any further assistance at all with these matters, then please contact one of our corporate specialists on 020 7841 0390 and we will be happy to discuss this with you.