What Happens if I Declare Bankruptcy?
Do not enter into bankruptcy lightly. The ramifications can go on for years after you have been discharged and it’s not an easy thing to recover from. It is important to note that bankruptcy should be considered as a last resort, and you should always seek advice before entering into it. Declaring yourself bankrupt can ruin your career, for example, solicitors are not allowed to practice if they have been declared bankrupt.
If you are struggling with debt, there may be other alternatives that could suit your circumstances better so be sure to consider these before you think about bankruptcy.
If you are declared bankrupt, you may have to give up most of your assets, salary and any investment in your house. Also, you may be forced to close your business if you own one. Any property, even jointly owned property, or shares may have to be sold to pay back money you owe your creditors. If you receive any money during the process you will probably have to give this up too. If you win the lottery, for example, or receive an inheritance, you will not have control of this money.
As a bankrupt person you are extremely unlikely to get credit of any sort for at least 6 years and you will face severe restrictions on what you are able to do.
If bankruptcy proceedings are taken against you, or you are thinking of making yourself bankrupt, you will need your own legal or financial support. Speak to the Citizens’ Advice Bureau, a solicitor, a qualified accountant, an authorised insolvency practitioner, a reputable financial adviser or a debt advice centre.
When someone is declared a bankrupt they no longer control of their assets. These are controlled through the receiver or trustee. The only possessions you will have a right to keep are any equipment, tools, books, vehicles and other items which you can prove that you to use personally in your job to earn an income.
Domestic utility suppliers, such as gas, electricity, water and phone may not demand payments for bills in your name which are unpaid at the date of the bankruptcy order. However, they may ask you for a deposit towards payment for further supplies or will arrange for the accounts to be transferred into the name of your spouse or partner. Bankrupts must pay continuing commitments such as rent together with any debts incurred after the bankruptcy.
There are four main things that a bankrupt is forbidden to do. They may not:
- hold certain public offices, such as MP, JP, school governor, the trustee of a charity or a pension fund.
- try to get credit for more than £1000 without disclosing that you are a bankrupt – and this includes trying to get credit jointly with someone else
- continue with a business in a different name from the one in which you were made bankrupt without telling all those involved the name in which you were made bankrupt.
- form or manage a limited company or act as a director without the court’s permission.