Bankruptcy
- Home
- Personal Insolvency
- Bankruptcy
Approaching the decision to invoke bankruptcy can be a very difficult thing. Independent Voluntary Arrangements under the Insolvency Act 1986 can act as a contract, which binds all parties and prevents any action being taken out against you.
If you are facing a financial struggle to make ends meet then bankruptcy may be a viable option. Creditors promote the idea of a “bad stigma” being attached to bankruptcy, when in fact this is a notion that’s fading fast as more people realise that bankruptcy can be the most suitable debt solution for them depending on their circumstances:
- If you have no assets.
- Live in a rented property or with family/friends.
- If your occupation is not affected.
You are able to keep the tools of your trade, and if you have a car worth £2500 or less you can keep that too. You can keep all clothing, bedding, furniture and household goods. The official receiver/trustee will take control of all your other assets on the making of the bankruptcy order. He or she, or any insolvency practitioner who is appointed as trustee, will dispose of them and use the money to pay the fees, costs and expenses of the bankruptcy and then your creditors.
In most cases, first-time bankrupts can be discharged within 12 months, and in some cases as early as 7 months providing none of your creditors object. As soon as you are discharged you can start to rebuild your credit rating again and all of the bankruptcy restrictions are lifted.
This is what the UK Government Insolvency Service advise:
An IVA is an Individual Voluntary Arrangement. Individual Voluntary Arrangements were introduced by the government in 1986 as part of The Insolvency Act. An IVA enables you (the debtor) to make a proposal to whom you owe the money and come to a settlement. The proposal will need to be accepted by the majority of your creditors for an IVA to be approved. An approved IVA will then stand as a contract that binds all parties and will prevent any further action against you and the creditors that didn’t accept the proposed IVA would also be forced to enter the IVA if the majority have approved.
You will be required to make a monthly payment over a 60 month period and after that whatever debt is left will be totally cleared, leaving you 100% debt free. An IVA is available for individuals, sole traders and partners who are struggling with their debts. An IVA is particularly used by individuals who own their own property and want to avoid the possibility of losing it through bankruptcy, an IVA is also usually the choice of individuals whose employment is of a professional status that would be affected otherwise through bankruptcy.
An IVA is a legally binding contract between you and your creditors and due to its formal nature it is supervised by an insolvency practitioner. IVAs allow you to offer a larger repayment towards your debts than would be expected if you were to be made bankrupt.
The stress and worry that comes with mounting debt only persists if you try to ignore the situation, but by doing this consequences are much worse. You could even find yourself in a position where bankruptcy is forced on you by your creditors. By filing for bankruptcy voluntarily you remain in control of the situation, and have a bankruptcy company on your side to assist you every step of the way.
Once you declare bankruptcy there is NO threat of bailiffs coming round. Once bankrupt, creditors can no longer contact you for the debt as you will no longer be responsible for it.
Going bankrupt will give you the chance to wipe off your debt and have a fresh start. Within 12 months a first-time bankrupt can be discharged, and the restrictions lifted.
If you don’t own your home, and if your occupation isn’t affected, then bankruptcy is an insolvency option worth your time considering.
Advice for Scottish residents
Personal bankruptcy for Scottish residents is called Sequestration. To be sequestrated you must owe at least £1,500 and either:
- One or more of your creditors must have taken you to court to enforce or demand you repay a debt or
- You must have been on a debt payment programme under the Debt Arrangement Scheme that has been revoked and one of the creditors in the Debt Payment Program have been to court and obtained a decree on one of the debts.
These are the main ways in which you can be sequestrated.
If either of the following apply to you then you are apparently insolvent:
- If you have not paid within 14 days notice of obtaining a ‘Charge for payment’.
- If you have not paid within 14 days notice of receiving a summary warrant against you to recover rates, Council Tax, other taxes etc.
- If you have not paid within 21 days notice of being served a Statutory Demand for Payment.
This situation is termed Apparently Insolvent.