How much debt can I have?
There is no maximum or minimum amount of debt that can be included in a bankruptcy. However, a creditor can only issue a bankruptcy petition against you if you owe them £5,000 or more.
What type of debt will be included?
Almost all debts can be included, some exceptions are student loans, court fines, or maintenance arrears, child support arrears, debts built up through fraud or debts arising from a personal injury claim.
When will I be free from my debts?
Most bankrupts are discharged from their debts after one year but there can be exceptions to this. If you have surplus monthly income you are expected to pay this to your bankruptcy for three years.
How does this option work?
You can petition for your own bankruptcy or a creditor can make you bankrupt but only if you owe them more than £5,000.
Once you are made bankrupt your affairs are handled by the official receiver, which is the government’s insolvency department. The official receiver calls you for an interview and assesses your assets and financial circumstances. If you have assets they may be sold to raise money towards your creditors.
In your bankruptcy all your debts other than those listed above are written off.
Bankruptcy is generally a good option when you have limited assets and rent your home.
What are the advantages?
- It allows you a fresh start when you are discharged, which is usually after a year
- Your debts are fully written off
- Creditors cannot take any action against you unless the debts are secured on your home or other property
- If you have a lump sum it is easier to offer this to all your creditors as full and final settlement in an IVA than informally approaching each individual creditor
- It removes all stress and anxiety with dealing with your debts and creditors
- You only need to make any contributions from your surplus income for a maximum of three years
- You can avoid selling your home if your partner or relative can buy out your share of equity
What are the disadvantages?
- You lose control of your affairs to the official receiver
- The official receiver will assess your affairs for at least the two years leading up to your bankruptcy, and can go back up to a five year period
- Your assets may be sold by the official receiver
- If you have equity you could lose your home
- Secured creditors can still take action against you
- You will be without a bank account for a short period
- Your employment could be at risk, so you need to check your employment contract
- There are some type of debts that will not be written off
- If you are self-employed, you could find it difficult to continue to trade
- If you are self-petitioning, you need to find the money for the costs (approximately £700)
- Your bankruptcy will be listed on the Insolvency Register as well as published in the Belfast Telegraph and the Belfast Gazette
- Bankruptcy will seriously affect your ability to get credit in the future
- You could have a “bankruptcy restrictions order” made against you for any dishonesty or unfit conduct
- The official receiver could take criminal action against you if it determines you have committed an offence, for example fraud or money laundering.