Everything You Need To Know About Bankruptcy
Bankruptcy can be a confusing, stressful process that puts your finances and assets at risk. Read on to find out more about Bankruptcy, its consequences and more.
Failure to pay your debts can result in you being made bankrupt. This puts your personal finances and assets at risk. Whilst sometimes declaring yourself bankrupt can be the best option, being made bankrupt by a creditor is a much more serious situation. If you are thinking about going down the route of bankruptcy, read more about the process here.
We understand how difficult and stressful the bankruptcy process can be, especially if it is out of your control as there are many elements to keep note of alongside the ramifications that can occur if you don’t comply with the Official Receiver/Trustee, however, as we always say – there are options and solutions available.
What Happens if You go Bankrupt?
After a creditor successfully petitions for your bankruptcy, you will be declared bankrupt by the Courts. It may be the case that the first you learn of your bankruptcy is when your bank accounts are frozen, or your house is threatened to be repossessed. Therefore, it is extremely important that you do not ignore letters from your creditors or the Courts.
You will be invited for an interview with the person who will oversee your bankruptcy. They will either be called an Official Receiver or a Trustee depending on the amount of assets you have. A Trustee is a licensed Insolvency Practitioner who is appointed by the Official Receiver, they are appointed once it has been confirmed that the equity in the bankrupt’s property goes above £15,000. Failure to comply with the Trustee can have serious consequences.
The job of the Official Receiver/Trustee is to take your assets and sell them for as much as possible. They then use this money to pay off your creditors and pay their own fees. Despite what you may have been told there is rarely such a thing as a ‘friendly Trustee’.
Your Assets During Bankruptcy
There are a lot of different misconceptions surrounding what happens to your assets in bankruptcy. The simplest explanation is that nothing is off-limits. There are a few cases when you may be able to keep assets. However, without specialist advice and help, you are unlikely to hold on to your assets.
If I go Bankrupt What Happens to my House?
If you own a property, it is very likely be repossessed during bankruptcy. Regardless of what type of property it is, residential or business. This is especially worrying as your main asset is likely to be your family home.
If you jointly own your property, it can still be repossessed. Because you own part of it, the Trustee is entitled to take the entire property. It’s not a wise idea to try and transfer assets into anyone else’s name as the trustee can overturn any transactions that were made in a 5-year period and repossess the assets.
If your home is at risk, we always recommend speaking to experienced bankruptcy experts as soon as possible.
What About Other Assets?
The trustee can recover any assets of value. This includes things like investments, cars, jewellery or even your pension in some cases.
If the bankrupt has significant earnings during bankruptcy, there may be an Income Payment Order that will apply. An IPO simply means that if there is surplus money available at the end of every month after all utility bills are paid, then the Official Receiver/Trustee may take a percentage of this for the benefit of the Creditors.
Other Impacts of Bankruptcy
As well as an immediate risk to assets, bankruptcy has several other impacts. These include:
- You cannot be the director of a company for the time you are bankrupt.
- Bank accounts will be frozen.
- Your credit score will be impacted for 6 years.
- Depending on your job, your employment may be impacted.
Bankruptcy: Your Best Options
Generally, if you have been fully compliant, after 12 months you will be discharged, and your bankruptcy will come to an end. However, in those 12 months other aspects may come up/be uncovered, therefore it’s important to note that the Trustee has a further 3 years to repossess property and assets.
There’s a lot to take in when it comes to bankruptcy, the most important element that we would like to highlight is the importance of your financial position in that your assets CAN be protected, but in order to do this, you must be proactive and seek out help at the early stages as this will have the most positive impact. Although it can seem tempting to negotiate with a ‘reasonable’ Trustee, this almost always makes things worse.
Our expert team have been taking on and negotiating bankruptcy cases for over a decade. Our experience and relationships with Trustees allow us to achieve commercial outcomes in favour of our client.
Contact us today to speak to a debt specialist.
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