Declaring Bankruptcy is not a decision that should be taken lightly. When you declare bankruptcy, you will retain the legal status of ‘bankrupt’ for approximately 1 year to clear debts you are not able to pay. Once you declare bankruptcy this will have a knock-on effect to your future financing, for example you will find it more difficult to get a loan or a mortgage.
The Official Receiver
After the order for bankruptcy is made an Official Receiver or appointed trustee will be appointed to your case. You are likely to hear from them approximately 2 days after the order has been made. They will probably ask you complete a questionnaire of your current financial situation and any assets you or your business own.
After the questionnaire has been completed and returned, the Official Receiver is likely to ask for an interview. This will go through the questionnaire you have completed and discuss any assets you have an any questions and concerns you wish to raise.
It is then the role of the Official Receiver to sell your assets in order to pay off your debts.
What assets will be sold?
The biggest concern for people during the bankruptcy proceedings is whether they will lose their home. When you are bankrupt it is very possible that your home could be sold to pay your debts. The Official Receiver has 3 years to take action against your home, if they have not done so your interest automatically reverts back to you.
How to stop your home from being sold:
- Family or dependents live there – You can delay the selling of your home for up to a year if your family or dependants live in the home. This is to give you enough time to find suitable accommodation.
- Someone buys your share – That person will then hold a beneficial interest in your property.
- Your home is in negative equity – Your share of the home needs to be valued at more than £1000 after sales costs.
Future impact of bankruptcy
A bankruptcy note will remain on your credit file for 6 years after the order has been made. This will mean you will encounter serious difficulty in getting any form of credit, entering into a tenancy agreement, running a business or getting a mortgage for several years.
I could also impact your working life. Some professions such as the finance sector, regulated professions like lawyers and accountants, and insolvency practitioners do not look kindly on bankruptcy. This could include a suspension of your license or difficulty in finding employment.