Bankruptcy
Bankruptcy may be applicable to an individual who is unable to pay his/her debts within terms. A bankruptcy petition to Court may be applied for either by a creditor who is owed more than £750, by the individual him/herself, by the Supervisor of a failed IVA, or by the Official Petitioner (effectively the Government).
The Court's discretion to dismiss a validly based creditor's petition is limited. If a debtor has no grounds to have the petition set aside, an IVA may be considered. Alternatively, the debtor may consider that the advantages of bankruptcy outweigh the disadvantages.
The principal advantage of bankruptcy is that creditor claims rank against the bankruptcy estate of the bankrupt, no longer strictly against the debtor, and the debtor may refer all of his creditors to the Trustee in bankruptcy responsible for realising the estate assets.
The principal disadvantage is that the debtor, with certain exceptions, loses assets, including any equity in a house, to the Trustee. Currently pensions are largely excluded from bankruptcy estates.The debtor may also have to make contributions from income to the Trustee.
Bankruptcies following from bankruptcy orders made since 1st April 2004 normally last for up to one year and impose significant restrictions on the bankrupt, particularly as regards disqualification from holding directorships, credit taking and disclosure. Bankruptcy offences are widely defined, are retrospective in effect, and can carry severe penalties. More severe restrictions apply to bankrupts who are identified as being culpable.
A professional review of the full implications of potential bankruptcy in the context of a debtor's particular circumstances can bring fuller understanding and a sense of control in place of uninformed anxiety.
This information is written in general terms and cannot be fully comprehensive. Its application to particular circumstances will depend on specific facts. The views and suggestions set out are not intended to constitute professional advice or to be a substitute for specific advice.
