Is Bankruptcy my only option?

Business Link has an online diagnostic tool which may help you with deciding the best approach for dealing with your debts. Although the tool is primarily aimed at those who are self employed it can be used by anyone and can be accessed on the link below

Business Link Diagnostic Tool

How do I make myself bankrupt?

First, you will need to complete the following forms. You can get the forms, free of charge, from a local court that deals with bankruptcy. You can also complete the forms on-line or print the forms off at The Insolvency Service's website at: www.insolvency.gov.uk

• The petition (Insolvency Rules 1986 form 6.27) - this form is your request to the Court for you to be made bankrupt and includes the reasons for your request. 
• The statement of affairs (Insolvency Rules 1986 form 6.28) - this form shows all your assets (anything that belongs to you that may be used to pay your debts) and all your debts, including the names and addresses of the creditors and the amount you owe each one. The form contains a declaration of insolvency that you will need to swear on oath before an officer of the court or a solicitor
• You can complete both of the above forms online via The Insolvency Service's Online Forms Service. This is an interactive internet service which can be accessed at a time and location that is convenient to you via The Insolvency Service's website, www.insolvency.gov.uk. Just follow the link "Do It Online" or “Bankruptcy application online” from the homepage.

The Online Forms Service is easy to use and provides assistance to allow you to complete the forms on your own. There is also a dedicated enquiry line telephone number 0845 602 9848 and e-mail address at onlineforms@insolvency.gsi.gov.uk if you require additional guidance in completing the forms. The Online Forms Service allows you to save and retrieve partially completed forms, with the ability to edit previously saved information. 

A secure database then captures the information you provide in the forms. This information is automatically deleted if you do not present your bankruptcy petition to the Court within six months, but if a bankruptcy order is made the information is made available to The Insolvency Service. This may reduce the need for the Official Receiver to ask you for additional information. 

Once you have completed the forms you will need to print three copies and take them to court. 

If you do not use the Online Forms Service you should complete the petition and statement of affairs forms in capital letters, using black ink.

If you are dealing with a county court, the court will need the completed forms and 2 copies of each before it can accept your petition for bankruptcy. If you are taking your petition to the High Court, you won't need any extra copies. When you have completed both forms, and printed the forms if you have used the Online Forms Service, signed and dated the bottom of every page, and have the fees ready, you can go to the court and ask for your petition to be dealt with.

NB: If you are, or were, running a business in partnership (even if there is no formal partnership agreement) and all the partners want to be made bankrupt, you will need different petition and statement of affairs forms. These are available from the Insolvency Service website under ‘Insolvent Partners Order Forms’.

How much does it cost?

• Court fee of £150. In some circumstances the court may waive this fee, for example if you are on income support - the court will advise.
• Deposit of £345 towards the costs of administering your bankruptcy, payable in all cases – there are some charitable trusts which will pay the deposit on your behalf in cases of severe financial hardship, and you should contact your local Citizens' Advice Bureau for details of such charitable trusts in your area.
• Fee to swear the statement of affairs. In a county court no charge is made, but £12 is charged in the High Court or before a solicitor

How do I make someone bankrupt?

To make someone bankrupt, you have to present a bankruptcy petition to the court, and prove that you are owed at least £750. You can show this by having an unpaid statutory demand or an unsatisfied execution of judgment, and you have to pay a £415 deposit, plus £190 court fee. It is usual to instruct a solicitor when trying to make someone bankrupt, because of its legal nature.

The forms you need to make someone bankrupt can be found on our website at www.insolvency.gov.uk in ‘Forms’ then ‘Forms for England and Wales’.  Alternatively you can complete the petition online.  Just follow the link "Do It Online" or “Bankruptcy application online” from the homepage.  

What does it mean to be bankrupt?

As a bankrupt:

• All your assets and liabilities are put into your bankruptcy estate, which is managed by your trustee in bankruptcy. Your trustee will organise the sale of the assets, and pay the creditors.
• You have a duty to provide information to the Official Receiver and Trustee, and attend at his office as and when reasonably required.
• Certain restrictions are placed upon you, which include not incurring credit of more than £500 without disclosing that you are bankrupt, and not acting in the management of a limited company without the leave of court.

What happens to a bankrupt’s assets?

The trustee in bankruptcy takes control of all the assets of a bankrupt, of any description in any part of the world, and sells them to pay money to the creditors. Certain assets are known as ‘exempt’, which means that the trustee will not take them. Exempt assets include equipment needed by a bankrupt in the course of his business (including a vehicle) and household items such as clothing, bedding, furniture, etc.

What happens to a bankrupt’s income?

After the making of a bankruptcy order, the OR has the power to ask the bankrupt to sign up to an income payments agreement (IPA), or to apply to court for an income payments order (IPO), both of which require the bankrupt to make contributions towards the bankruptcy debts from his income, if he can afford to.  The OR will not seek an IPA and the court will not make an IPO if it would mean that the income of the bankrupt (after taking into account the payments under the IPO) would be insufficient to meet the reasonable domestic needs of the bankrupt and his family.  There are no fixed guidelines regarding IPAs and IPOs - each case is assessed on an individual basis.

Such contributions would continue for up to 3 years. Further, if the bankrupt has any increase or decrease in income, the IPA/IPO can be reviewed.

What do I need if I attend at the OR’s office immediately after the making of the bankruptcy order?

You need full details of all your financial affairs, including names, addresses and account/reference numbers for banks, building societies, solicitors, accountants, credit cards, landlords, mortgage company, hire purchase/loan agreements, etc; details of all their assets, i.e. type, value, location, insurance cover, etc; any credit/bank cards and cheque books (which should be given to the OR); your national insurance number, tax reference (including tax office address) and VAT number (if applicable) . This information is needed to enable the OR to notify all relevant parties of the insolvency order, and then you will need to complete a questionnaire and attend at a later date for an interview, to which you will need to take all financial records, including trading records (if applicable).

Click HERE to view the General Bankruptcy Overview flowchart.

BANKRUPTCY

The term ‘bankruptcy’ refers to an insolvency court order against an individual. This includes an individual who trades on his own account (known as a sole proprietorship).

The bankruptcy order is simply an order of court adjudging that the individual is in bankruptcy. The implications of being bankrupt can be found at sections 6 to 10 of the leaflet ‘Guide to bankruptcy’.

The bankruptcy order is made as a result of a bankruptcy petition, which is an application to the court asking for a bankruptcy order to be made and giving reasons why the application has been made. There are two ways of becoming bankrupt :

1. An individual can present his own bankruptcy petition, known as a debtor’s petition

2. A creditor can present a bankruptcy petition against an individual who owes him money – this is known as a creditor’s petition

Bankruptcy orders made as a result of a debtor’s or a creditor’s petition are the same.

OFFICIAL RECEIVER’S & TRUSTEE’S ROLE

The Official Receiver is an officer of the Court. An insolvency practitioner may also become involved. An insolvency practitioner is an individual licensed to practise in insolvency matters and works in private practice.

The Official Receiver and the trustee in bankruptcy are two separate roles, and have separate responsibilities.

General case

The Official Receiver is involved in every bankruptcy. When a bankruptcy order is made, the Official Receiver has a duty (under the Insolvency Act 1986) to investigate where necessary, the bankrupt’s affairs and send a report to creditors.

Further, when a bankruptcy order is made, the Official Receiver is usually appointed ‘Receiver and Manager’ of the bankrupt’s estate. This means that the Official Receiver has to identify and protect the bankrupt’s assets prior to the appointment of the Trustee in bankruptcy.

The Official Receiver has to decide whether to call a meeting of creditors, the sole purpose of which is for the creditors to vote for the appointment of an insolvency practitioner as the Trustee in bankruptcy. The Trustee is responsible for realising the assets and sharing the monies out between the creditors. The Official Receiver still has his investigatory duty notwithstanding the appointment of a Trustee.

If a meeting of creditors is not called, the Official Receiver becomes Trustee in bankruptcy, so he has two roles to perform. 

Exceptions

Secretary of State appointments

The Official Receiver may decide not be call a meeting of creditors, but apply to the Secretary of State for the appointment of an insolvency practitioner as Trustee in bankruptcy. This may happen for a variety of reasons, but commonly this happens where assets come to light after a no meeting decision has been made, or because the creditors agree to an appointment before a meeting and so it avoids the expense of the meeting.

IVAs (see separate section on IVA – individual voluntary arrangements)

Sometimes, if the debtor has been in an IVA which has failed, the supervisor of the IVA (who is an insolvency practitioner) may present the petition for bankruptcy. If the bankruptcy order is made, the supervisor may be made trustee of the bankrupt’s estate on the making of the order. The Official Receiver still retains his investigatory role.