The thinking behind UK bankruptcy law is to allow people who have got into debt through no fault of their own a way of paying off their debts by selling their assets and relieving them of the stress and strain of financial hardship within a designated timeframe.
The Enterprise Act
Bankruptcy is governed primarily by the Enterprise Act of 2002 but amendments were made to it is 2002 and 2004. It is 2004 that marks the most notable changes to this act. These changes had a big impact on UK bankruptcy law for individuals and small businesses alike. This is because the changes have had significant impact on the law surrounding bankruptcy, thus making it easier for people in serious debt to find a solution. However, the flip side of this is that record numbers of people are now filing for bankruptcy then ever before.
The most significant change to the law surrounding bankruptcy is that of selling the home of a bankrupt. Until the changes in 2004 the court appointed Trustee has no time limits on when they could sell your home to pay debts. If they waited five or six years there was nothing you could do. Now, however, they have a strict time limit of three years in which to do so. Once this time limit has passed the house becomes the property of the bankrupt person once more and can't be sold -unless you go bankrupt a second time.
For anyone going bankrupt another significant change that is making it the number one choice for people in debt is the duration. Until the reform of the Enterprise act, bankruptcy normally lasted up to three years before being discharged. Now that time limit has been reduced to only one year. This means that to many people searching for a solution to financial hardship bankruptcy is a more attractive solution than the much publicised IVA which has a duration of sixty months. Creditors still prefer to chase you for months with threatening letters and phone calls as they get more of their money back than they do if they choose to register bankrupt. Bankruptcy means you only pay back a small portion of your original debt and the remainder is wiped clean. This is the core reason why many creditors never try to register you bankrupt despite the fact you are not paying them regular payments, for them bankruptcy is not the best option.
Apart from these changes to the law there are the existing requirements that have to be adhered to, such as closing your bank accounts, returning your credit cards and leased goods. You will also have some severe restrictions placed on you regarding starting a business. Your landlord, creditors and family are informed as to your situation, and as mentioned before you will have your details published in the press. However, as more and more people are turning to bankruptcy as a solution the stigma attached to this will lessen over time.
Legal Advice
The law is a very complex thing so to make sure you get the best possible outcome from declaring bankruptcy it is always advisable to consult a solicitor. The first consultation should not cost you anything and because of your financial situation you should be covered my Legal Aid. Another sound reason for seeking legal help when considering bankruptcy as an option is where you live. There are different rules governing different parts of the UK. For instance, there are major differences between England, Scotland and Jersey in this field.
Share Your Story, Join the Discussion or Seek Advice..
A friend of mine applied for and was made Bankrupt 4 years ago (2009) but has not heard anything. Is the discharge automatic after 12 months or does he have to apply for it
Thank you
eddie - 20-Nov-13 @ 10:21 AM
What if you live with son and do not have assets and is there a limit if you work on how much you earn is my sons house in peril
bub - 14-Feb-13 @ 3:17 PM
Some of the information on this site is not strictly true.
I was made bankrupt in 2011 by a creditor (Travis Perkins Group ) - so beware some creditors will do it sometimes just to be spiteful !
You are implying that you cannot run a business whilst bankrupt - wrong !!
You can be a sole trader but you cannot run a limited company
I was a company director prior to my bankruptcy
I had to resign immediately on becoming bankrupt
The company was then struck off the register and dissolved
I became a sole trader straight away without any objections from the OR or the trustees and I am still in business today.
You state that landlords and a person's family are informed - only if they happen to read the London Gazzette they will
Creditors will find out automatically from the OR but only the one's that you have named on your list of creditors that you have supplied to the OR.
All the others will find out from periodic credit checks or checks with the Insolvency register
The same goes for your landlord
He or she will not automatically be told
The may be some clause in your tenancy agreement relating to bankruptcy, but as far as I am aware as long as you pay your rent you will still have a roof over your head
My name was not printed in any other major newspaper other than the London Gazzette
You will only appear in the local paper if you have been very naughty in deed and committed a bankruptcy offence or you have acted fraudulently or your case is otherwise high profile.
So if it is just a standard everyday personal bankruptcy then don't worry too much about your name being plastered all over the press - it doesn't happen !!!
My family only found out when I told them - so I cannot understand why you are implying that someones family are told ???
You will be pestered by all sorts of low life from the second your name is on that bankruptcy register - low life such as finance companies / insolvency practitioners trying to " help you out of this mess " - ha ha yeah right - trying to help themselves and stitch you up with a massive expensive loan to pay of your creditors and make your situation worse
I even had one company called The Bankruptcy Protection Fund Ltd make a completely unsolicited cold call personal visit to my home address whilst I was out at work and their representative told my wife that unless we signed up with them then not only would my half of the house be lost but hers would go as well - completely untrue in the case of a jointly owned property - only the bankrupts share belongs to the trustee.
My advice is to tell companies like this to GO AWAY very strongly !!!
You will not lose your house straight away - the OR or trustee will usually leave you alone for twelve months - where your property is concerned ( I was made bankrupt in April 2011 and we are still living in our property and it is almost August 2012 )
The trustee have been in touch and they want to get the ball rolling on disposing or realising the
