Bankruptcy

Bankruptcy can provide a fresh start, especially if you cannot afford to make the agreed payments to your unsecured creditors and you don’t have many assets. Your household possessions and certain “tools of trade” are excluded from bankruptcy. You will be discharged 12 months after the date of your bankruptcy order (unless you do not co-operate with your Trustee as your discharge can be suspended). You may only apply for bankruptcy if you have a minimum debt level of £5000. If you declare yourself as bankrupt, you may still be able to obtain credit up to £500 without a need to inform the creditor. The One Money team at One Manchester can help you through this process if it is felt that this is the correct solution for you.

Am I eligible for bankruptcy?

  • You must have a minimum total debt level of £5,000 
  • If a DRO is not a more suitable solution

Advantages

  • Your unsecured debts will be written off
  • You will not need to contact your creditors 
  • Creditors will stop contacting you and cannot take any further legal action against you to recover the debts
  • You are allowed to keep certain items such as household goods and a reasonable amount to live on

Disadvantages

  • You can lose your assets such as your home if there is equity in the property
  • You may have to sell your car or sell it for a cheaper model 
  • Filing for bankruptcy costs £680 - clients who cannot afford/do not wish to make a one time payment of £680 may also pay this in instalments
  • Some jobs are affected if declared bankrupt, such as those in a legal or financial positions
  • It could cause additional complications for those wishing to move to another country  
  • Your bankruptcy will appear on a public register 
  • Your credit rating will be affected

Things to consider

  • If you don’t keep to one of the other debt solution, creditors may petition for you to become bankrupt. This is known as ‘petitioned bankruptcy’ and is used as a last resort. 
  • Bankruptcy is not as stigmatic as it used to be. 

Bankruptcy procedure

  1. Before you apply to go bankrupt, try to make sure you have enough cash for day-to-day expenses, because once a bankruptcy order is made your accounts will usually be frozen.
  2. If your application is accepted and a bankruptcy order is made, your money will come under the control of the Official Receiver. The Official Receiver will arrange an interview with you. After your interview, they will tell your creditors about the bankruptcy and send them a report with a summary of your financial situation. Your assets may be sold to pay off some or all of your debts.
  3. Your name and bankruptcy details will be published on the national register of bankruptcies, called the Gazette.
  4. Your bankruptcy will normally end after a year. The Official Receiver will tell you when it is over. Most debts that haven’t been paid will be written off although some debts like court fines and student loans can never be written off.
  5. Even when you’re no longer bankrupt, you could have a bankruptcy restriction order made against you. This can last up to 15 years and will restrict your financial affairs. This order could be made if, for example, you do not co-operate with the Official Receiver, or you take on debts knowing that you won’t be able to pay them back.

For help with debt, speak to our friendly One Money team of specialist advisers on 0330 355 1000 or email onemoney@onemanchester.co.uk

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