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Life after bankruptcy

Fewer people in the UK were declared bankrupt in 2011 than the year before, however overall personal insolvencies rose by approximately 0.5%. The net figure of personal insolvents remains worryingly high at 119,850 – that’s 26 insolvents in every 10,000 adults in England and Wales. Although 2011 brought a slight dip in bankruptcies, the overall trend demonstrates a continuous rise in insolvencies and with the economy remaining stagnant the debt collection industry will remain buoyant.

What is bankruptcy?

Bankruptcy is one of three main options when a person becomes insolvent. It can be brought by a creditor when a person has breached the terms of a financial agreement, or it can be sought individually.

When you have been declared bankrupt the Courts assign a trustee to take control of all your assets, including your home. The job of the trustee is to liquidate your assets and distribute the proceeds from their sale to your creditors. Normally, if you share your home with a partner or have children at home, the courts will grant a period of up to one year to enable you to find alternative accommodation. If you have only a part-interest in a property the Official Receiver may consider an offer from other interested parties to buy your share. In cases where the property is in negative equity, it is not in the interests of creditors for your home to be sold and therefore you may be granted the right to remain in the property – although you will have to be able to afford to service the mortgage.

There are certain assets which will not be liquidated and you will be free to keep such as clothing, bedding, furniture and basic household items, a low value motor vehicle and equipment needed in your employment or line of business, including tools and books.

The biggest disadvantage of bankruptcy is not in losing certain possessions but in the public stigma of bankruptcy itself; bankruptcy notices are published in the London Gazette and in some local newspapers. Other restrictions include the removal of the right to take credit, without first notifying the creditor of your bankruptcy, of more than £250 – either alone or jointly with a partner. It is not possible for a bankrupt to be involved in the formation or promotion of a company without obtaining the Court’s prior permission and a bankrupt may not operate in any other business in any name other than the one registered as bankrupt. There are also restrictions on holding certain positions and public offices.

While you are an un-discharged bankrupt you may find it difficult to open a bank account, although some high street banks do offer specifically tailored accounts. When applying for a new account, you must always disclose your bankruptcy status and you are not eligible to use cheques or take overdraft facilities until you have been discharged as a bankrupt. The trustee must be informed about any funds in the bank account which are over and above agreed living expenses. Cash, in excess of living expenses, can be removed from your account and distributed to the creditors.

When you are discharged from bankruptcy, usually after a year, although bankruptcy can be imposed for anything from a few months up to fifteen years, the restrictions are brought to an end and you are no longer liable for your previous debts.

Increasingly popular options, such as Individual Voluntary Arrangements (IVAs) and Debt Relief Orders (DROs), have saved many from bankruptcy however experts predict the continuous rise in individual insolvency over the next few years.

Professional help and advice

If you require professional advice on bankruptcy and other financial matters, Ligerion capital can help. Visit them online at: http://www.ligerion.com/