Declaring bankruptcy - What you need to know.

December 2, 2021

Are you considering whether or not to declare bankruptcy? Perhaps you are facing foreclosure on your home, or you have lost control of your debts, it is vitally important for you to understand what your options are. If bankruptcy is your only option, remember that you are not alone, you are not the only person who has done this, nor will you be the last. If it is your last resort, let the team at Kirk Hills, experts in bankruptcy and insolvency, tell you what you need to know about declaring bankruptcy. 


 What is bankruptcy?


When you declare yourself bankrupt, just about all of your debts are written off. This sounds great, and like the perfect solution for anyone facing financial difficulties, but it is not as simple as it sounds.

There are some debts which cannot be written off, these include any student loans you may have, social fund loans, fraudulent debts which you have developed, or even child maintenance arrears. While filing for bankruptcy your assets, if you have them, will be assessed by a debt adviser who will decide whether or not they can be used to pay off some of the debt. This is not to say that you will lose all of your assets. For instance, if you have equipment which you need to work then you can keep that, like tools. However, if you own a house or a car these will most likely be sold and used as repayment. 


If you are someone who has a number of assets it is vitally important that you assess the worth of them before you declare yourself bankrupt. You may be in a position to sell said assets before declaring, meaning you do not have to go through this very long and stressful process. 


As already mentioned, this is not a simple fix to financial problems. Going bankrupt will make it very difficult for you to take out credit, and will remain on your credit file for six years. 


 How do you apply for bankruptcy? 


If you are out of options and are now asking how you apply for bankruptcy, then you have to do so online. You can only do so on the Government website and before doing so, you need to ensure that you can pay the £680 fee to submit your application. 


Once you are able to pay the fee, you will be required to complete the online application while also creating your own online account. All of this is on the Government website. During this process, you will be required to give information about the following: 


  • Your debts
  • Your status of employment/income
  • Any pensions you may have
  • Your bank accounts
  • Any assets you may have
  • Your current outgoings


Along with that, you will also need to submit letters which you have received from any enforcement agents or bailiffs. Once you have done this your application will be sent to the Insolvency Service, where an official adjudicator will review it and decide whether or not you will be made bankrupt. This decision would usually come within 28 days of you submitting your application. 


What do you do once you have declared bankruptcy? 


Now, you have submitted your application, it has been accepted, what happens next? Once you have been declared bankrupt by an official adjudicator from the Insolvency Service, the creditors assigned to you will write off any of your ‘unsecured debts’. This adjudicator, or Official Receiver, should usually be appointed to you within two weeks of receiving your bankruptcy order, though it may be longer if your situation is more complicated. 


Your receiver, or adjudicator will take a look at your income, outgoings, and assets in order to start working on how they can help you meet your debts. During which, you may be asked to attend an interview with them to discuss the situation. These creditors will take control of the situation, making formal claims to the trustee or trustees for the money that they are owed, as you are not allowed to make any direct payments to them and similarly they cannot ask you for payments directly. 


This, however, allows you to make a ‘fresh start’. It is still very important to understand and accept that this fresh start does come with the notion that you will face some challenges having declared bankruptcy. For instance, during this time you will not be able to apply for credit over the sum of £500 without informing the lender of your bankruptcy. 


Being discharged from bankruptcy


At some point, you will be discharged from bankruptcy. This is typically after 12 months on the first anniversary of the date in which the bankruptcy order was made. However, you may be discharged later in what is called a ‘delayed discharge’. Once discharged you are released from any debts which were covered by your bankruptcy, while also taking away restrictions which you were facing while bankrupt. 


That being said, being discharged does not mean that your belongings, or assets, will be returned to you. Even if some have not yet been sold. However, if you have attained any new assets since being discharged, more often than not they will remain yours and are not going to be claimed by a trustee. This is not the case for any payments you receive by claiming for PPI, or Payment Protection Insurance, which was mis-sold before becoming bankrupt. 


Anyone considering how to declare bankruptcy should take a considerable amount of time to really assess their current situation. This, as made evident in this article, is not a simple process. It is much more complicated than simply having your debts wiped. This is something which can have ongoing implications. But if this is the decision you have made, we hope that this advice proves beneficial to you.

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