Will a Second Bankruptcy Mean More Penalties?

Q.

I was declared bankrupt on 1st August 1994 and then discharged on 1st August 1997.

I am now in a situtation where bankruptcy may be an option but I need information about how long I will be bankrupt for the second time.

Does being declared bankupt a second time mean greater penalties and how long before I would be discharged?

A.

Bankruptcy is a decision that nobody takes lightly. Frequently, the reasons for bankruptcy are completely out of the control of the individual in question; this is particularly the case in the current climate, where interest rates are rising, banks are calling in debts, and unemployment is at its highest in almost two decades. As such, bankruptcy is frequently the only option. Even if you have been declared bankrupt once already, if you have been discharged then a second bankruptcy may well be the best option.

There are no legal reasons why you should not petition for your own bankruptcy a second time. However, there are certain aspects of the process that will be different. In the first instance, the Official Receiver will look into your affairs more carefully this time around. They will require more evidence to be satisfied that bankruptcy is the only option, and this is likely to result in a longer interview and a request for more supporting documentation. First time bankrupts may conduct the initial interview with the Official Receiver by telephone. This is not an option the second time round; you will be required to attend a face to face meeting in an Insolvency Service office.

Perhaps more importantly, the fact that this would be your second bankruptcy will have an effect on the process of discharge. First time bankrupts are automatically discharged by the county courts. However, if you have been an undischarged bankrupt at any point in the fifteen years prior to your petition (as you have been), there are certain restrictions placed on your discharge. As you were discharged before 1 April 2004, the order discharging you from your bankruptcy will stand. However, as a result of new legislation, anyone with a bankruptcy order either outstanding or discharged after 1 April 2004 will not be discharged until 1 April 2009, unless they are granted a separate order from the courts.

Finally, you are obviously aware of the implications bankruptcy will have for your ability to obtain credit. However, it is important to remember that, while bankruptcies should theoretically affect your credit rating for a period of seven years, they sometimes remain visible for longer. If this is the case for you, a second bankruptcy will further damage your credit rating for the future.