Bankruptcy is another way of dealing with debts you are unable to pay. The bankruptcy proceeding frees you from your debts so you can make a fresh start (subject to some restrictions). It also makes sure your assets, if any, are shared out fairly among your creditors.
Filing for bankruptcy
When a bankruptcy order has been made, you must comply with the official receiver's request to provide information about your financial affairs. The receiver is appointed by the court. You may also have to go to the court and explain why you are in debt. If you do not co-operate, there is a possibility you could be arrested.
The official receiver will tell your creditors that you are bankrupt. They may either act as your trustee or may arrange a meeting of creditors for them to choose an insolvency practitioner to be the trustee.
The trustee will tell the creditors how much money, if any, will be shared out in the bankruptcy. Creditors then have to make their formal claims.
In a creditor's petition, the costs of the bankruptcy proceedings are paid first from the money that is available. The costs include fees that the official receiver, or the insolvency practitioner, charges for administering your case.
The official receiver or trustee will take control of all your non-essential assets on the making of the bankruptcy order. They will dispose of them and use the money to pay the fees, costs and expenses of the bankruptcy and then finally your creditor's claims.
If you own your home, whether freehold or leasehold, solely or jointly, mortgaged or otherwise then your interest in the home will form part of your estate. This will be dealt with by your trustee. It is possible that your home may have to be sold to contribute as payment towards your debts.
A debtors petition is where an individual voluntarily applies to the court to be declared bankrupt. Any fees need to be paid prior to any court declaration. The consequences and effects are almost identical to the above mentioned creditor petition.
Much of this information is referenced from the Insolvency Services website. For more information click on bankruptcy to visit The Insolvency Service website.
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