Bankruptcy - Through the Gate

Where debts are over £30,000 Debt relief Orders do not apply but bankruptcy can be an option.

Bankruptcy – The Final Option?

There is common misconception that you only get made bankrupt by someone you owe money to. Many bankruptcies take place because individuals decide to apply for their own bankruptcy. In fact once creditors know you are in prison, they may well delay proceedings until you are released.

Whether bankruptcy is appropriate for you depends on your personal circumstances, and this article can only provide information and guidance.

However, in writing this article I have spoken to a number of former residents that wished they had entered bankruptcy whilst in prison rather than awaiting the inevitable on release.

Overview

Essentially you make yourself bankrupt if you cannot pay your debts and your application will be looked at by the Adjudicator within the Insolvency Service. The application can be made online.

One barrier to entering bankruptcy though is the fee of £680 and this needs to be paid when the application is made. Once you’re bankrupt, The Official Receiver known as the ‘trustee in bankruptcy’ steps in to take control of your debts and you no longer have to pay them.

Bankruptcy will only help you with your civil debts, and does not impact on criminal court fines, compensation or POCA orders.

Any assets that you do have to be passed over to the trustee in bankruptcy including any equity in your home.

Bankruptcy period

You are normally bankrupt for a period of twelve months, and if you adhere to the terms of the bankruptcy you get an automatic discharge from bankruptcy. You become what is known as a ‘discharged bankrupt’.

Bankruptcy restriction s include:

borrow more than £500 without informing the lender that you are a bankrupt
act as a director of a company without the court’s permission
create, manage or promote a company without the court’s permission
manage a business with a different name without informing people you are a bankrupt

Implications

Your credit report will highlight your bankruptcy for a period of six years so it will be difficult to get credit for a while.

You will still though be able to access a basic bank account either through the prison or via www.throughthegate.co.uk. There are also a number of ‘credit builder’ credit cards that can help you build up your credit rating.

For those that are self-employed HMRC will automatically cancel your Unique Taxpayer Reference (‘UTR’) and issue you with a new one.

You usually keep any money that you’ve put into a pension.

You have a ‘fresh start’ without the burden of significant debt.

Where debts are over £30,000 Debt relief Orders do not apply but bankruptcy can be an option.

Personal Bank Account