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Bankruptcy

Bankruptcy

What is Bankruptcy?

A creditor owed at least £5,000 may issue a bankruptcy petition to the Court. This is known as a Creditor’s Petition. If the debt remains unpaid the Court may grant a bankruptcy order against the person. Once a bankruptcy order is made, a Trustee in Bankruptcy (“the Trustee”) will be appointed who will realise the bankrupt individual’s property and distribute the proceeds to creditors. A person is discharged from their bankruptcy normally after a 12 month period and their liabilities after effectively extinguished. However, an individual who has been declared bankrupt is required to cooperate with the Trustee by virtue of Section 333 of the Insolvency Act 1986 and if that is not the case then the automatic discharge from bankruptcy restrictions (such as obtaining above certain levels of credit without notice of bankruptcy) can be suspended.

Does someone need to wait for Creditors to make them bankrupt?

An individual can voluntarily take action and petition for their own bankruptcy. This is known as a Debtor’s Petition. Before taking such steps, professional advice should be sought from an Insolvency Practitioner and the consequences given serious consideration. If you have very little in the way of assets and the amounts owed to your creditors is below £20,000 you can potentially avoid bankruptcy altogether. You may be able to apply for a Debt Relief Order which will give you an opportunity to restructure your finances. There are certain restrictions, for further details please contact us to consider your situation.

Alternatives to bankruptcy?

If you have very little in the way of assets and the amounts owed to your creditors is below £20,000 you can potentially avoid bankruptcy altogether. You may be able to apply for a Debt Relief Order which will give you an opportunity to restructure your finances. There are certain restrictions, for further details please contact us to consider your situation. Alternatively, you might be able to enter into an Individual Voluntary Arrangement (“IVA“); a contract with your creditors to avoid going bankrupt. Speak to us if you would wish to see if you are able to enter into an IVA.

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