Purpose of Bankruptcy
The primary purpose of the laws of bankruptcy are: (1) to give an honest debtor a "fresh start" in life by relieving the debtor of most debts, and (2) to repay creditors in an orderly manner to the extent that the debtor has the means available for payment.
Bankruptcy allows debtors to resolve debts through the division of non-exempt assets among creditors. Additionally the declaration of bankruptcy allows debtors to be discharged of most of the financial obligations, after their non-exempt assets are distributed, even if their debts have not been paid in full. During the pendency of a bankruptcy proceeding, the "debtor" is protected from extra-bankruptcy action by creditors by a legally imposed "stay."
Taken from Wikipedia article on Bankruptcy
Before you consider Bankruptcy
- Fill out a "Debtors Petition" in triplicate and a "Statement of Affairs" in duplicate
- File these with the local county court.
- Pay the court fee and administration fees
- See a Judge, who will check that a bankrupcy order is appropriate.
- Meet with the Official Receiver who will try to determine what lead to your bankruptcy and then set out a repayment plan known as an Income Payment Order. This will be based on what you can afford, and will last for three years.
- No longer has the stigma associated with it that it once had.
- Frees you from overwhelming debts
- Allows you to make a fresh start
- Shares your assets fairly amongst your creditors.
- You are likely to loose any of your possessions that have value. This will include your house. However, you will be able to keep the following items unless their individual value is more than the cost of a reasonable replacement:
- tools, books, vehicles and other items of equipement that you need to use in your employment, business or vocation
- clothing, bedding, furniture, household equipment and other basic items you and your family need in the home.
- You will be required to make a contribution towards your bankrupcy debts from your income for up to 3 years from the date the IPO is made.
- You will face certain restrictions as an undischarged bankrupt. It will be illegal for you to:
- obtain credit of £500 or more either jointly or alone.
- carry on in business directly or indirectly in a different name from that in which you were made bankrupt, without disclosing to those with whom you do business the name in which you were made bankrupt.
- be involved directly or indirectly in promoting, forming or managing a limited company or acting as a company director, without the courts permission.
- You will normally remain bankrupt for a period of 12 months before you are discharged, however you will be obliged to make contributions from your income to your bankruptcy debt for up to 3 years in total.
- If the Official Receiver decides that you have been dishonest either before or during the bankruptcy, or that you are otherwise to blame for your position, then they may apply to the court for a Bankruptcy restrictions order, which could essentially extend the period of Bankruptcy for 2 to 15 years.