Bankruptcy is a way of declaring that you are insolvent. There are two ways on how to be made bankrupt in the UK. You can either apply to the court or your creditors will apply for you. If you owe 750GBP or more to your creditors, they can apply for bankruptcy for you. Once you are declared bankrupt, you are listed under the Individual Insolvency Register. Your remaining assets will be sold to pay for what you owe and you need to follow bankruptcy restriction rules in order to be discharged from bankruptcy.
You can apply for bankruptcy by petitioning the court to declare you bankrupt. The court will then decide whether your request will be approved or denied after looking into your finances. If the court decides to declare you bankrupt, they will issue a court order against you to make it official.
Bankruptcy restrictions are very strict and it is a criminal offence to break them. Usually, the restrictions lasts only up to 12 months but if you break some of the rules, the restrictions will last longer. The bankruptcy restrictions include not being able to take out a loan more than 500GBP as well as not being allowed to manage a business without the permission of the court. You also have to let your partners know that you are under bankruptcy if in case you are managing their business for them.
What Happens To Your Assets
Everything of value you have left will be sold to cover for what you owe. There will be a person who will be appointed to manage your bankruptcy and this person will determine all your remaining assets and take the lead in solving your financial woes.
Your house, your car and anything else that is of value will be sold. Some items you can keep are those that you need for your job and some household items that are of reasonable value. Your bankcards, credit cards and check books will be surrendered to the person managing your bankruptcy. All your accounts will be frozen and only money that you need for necessities will be released to you. If you have a partner on a joint account, your partner can get his or her money back but yours will remain frozen.
In case the money raised from your assets is not enough to pay for your debts, you will have to make monthly payments depending on how much income you have and how much is left after food and bill expenses. The person managing your debt will ensure that you follow the Income Payment Agreement. In case you don’t, he or she can get the court to issue an Income Payment Order against you so you will be forced to follow.
Once the 12 months is up and you have not broken any bankruptcy restrictions, discharge is usually automatic. You don’t get a letter from the court but you can request one for a fee. If you are discharged early than 12 months, you will receive a Notice of Early Discharge.