© 2017 Fraser Frayne Insolvency Practitioners Limited
Fraser Frayne Insolvency Practitioners Limited
Old Canal Cottage
Bath BA2 8BS
Tel: 01761 437754
Bankruptcy is a formal insolvency procedure used to deal with the affairs of individuals who have been legally declared to have liabilities which exceed their assets or to be unable to pay their debts as they fall due. This legal declaration (the "bankruptcy order") is made by the courts and may be obtained by applying to Court by any creditor owed over £5,000 or by the the application of the individual Debtor concerned. However, Debtors now apply online with the Insolvency Service and this no longer requires a specific Court Order.
If a Bankruptcy Order is made against a Debtor, his (or her) affairs will be dealt with by a Trustee in Bankruptcy (the Trustee) or the Official Receiver and, subject to certain exemptions, all of the Debtor’s assets will be sold to pay his creditors, as far as possible. Assets which usually a Debtor should be allowed to retain include:
The Trustee would, therefore, seek to sell the Debtor’s home, or at least realise his interest in it, provided its value was in excess of any mortgages on the property. He would also seek to realise any shares, investments, antiques, bank or building society accounts and any other valuable assets not protected by law which can, in certain circumstances, include assets the Debtor had previously given away or sold off cheaply, even though now in someone else’s name, or debts the Debtor had repaid unfairly ahead of other creditors, (typically, repaying relatives in the last two years).
Unless a Debtor had previously been bankrupt, his bankruptcy will usually last no more than twelve months, but he will be subject to a number of restrictions during this time. His Trustee or the Official Receiver may also advertise details of his bankruptcy in a local paper and inform a variety of interested parties of his bankruptcy including personal or business landlords.
Any assets receivable whilst bankrupt, such as a lottery win or inheritance, will be used to pay the Debtor’s creditors. Dependent upon the levels of his income and expenditure, the Trustee may make an application for an Income Payments Order against the Debtor. If an Income Payments Order is made by the Court, then the Debtor will be required to make monthly payments for a period of 36 months from the date of the Order.
There is a potential liability for bankruptcy offences, for example, gambling, giving away assets or selling them at less than their value, deliberately paying off some creditors in preference to others, incurring debt that the Debtor knew he had no reasonable chance of repaying, and he may be subject to a Bankruptcy Restrictions Order (“BRO”). If a BRO is made against the Debtor, he will be subject to certain restrictions for the period stated in the Order. These restrictions include preventing him from acting as a company director and having to disclose his status as a bankrupt if he wishes to obtain credit of more than £500.
Bankruptcy does nevertheless offer the opportunity of a fresh start as, in most cases, it prevents the Debtor’s creditors making any further claims against him.
This outline is general and may not apply to a specific Debtor’s circumstances for which a Bankruptcy Order may not be appropriate. The outline, views and suggestions set out are not intended to constitute professional advice, nor to be a substitute for specific advice.
Furniture, bedding, clothing and household equipment for basic domestic needs;
Items required to continue a trade;
Money in a pension fund;
Certain other things which are specifically excluded by law
Registered in England Co. No. 6934426 VAT No. 972 6786 64
Registered Office: Old Canal Cottage Dunkerton Bath N E Somerset BA2 8BS
Company Secretary: Jan Bartoszewski; Directors: Matthew Frayne BA, FIPA, FABRP; Fraser Frayne-Watt
Licensed Insolvency Practitioner licensed by the Insolvency Practitioners Association
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