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Mick Dundee

Bankruptcy - The Easy Option

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If you have debt problems, you may be thinking about the possibility of bankruptcy. It's important to understand what bankruptcy is, and what alternatives exist. Bankruptcy isn't permanent, so you may choose it as a way of clearing your debts and making a fresh start.

Is your home is about to repossesed ?

Is your credit record a complete disastor ?

Are creditors ringing you for payments missed or writing letters with talk of court action ?

Dont stand for it.

Bankcruptcy is very bad. . . isnt it ? NO.

Bankcruptcy is a legal form of protection. By using Bankcrupcy you have chance to begin again and draw a line under past mistakes. It is myth that you cannot open bank accounts or operate debit cards - of course you can.

You may not be a director of a company or have anything to do with the running of a company. (Most dont need to)

Its a simple as this. You go into bankcruptcy. You do not take out any credit until the order has been discharged. You are obliged to tell certain people, but if they dont ask, you may decide to tell them at a more oportune moment. (Most people forget to tell their employees).

Your name is published in the local paper, but dont worry, hardly anyone reads that section anyway.

Here some government advice on what happens. Remember, dont live your life in misery, draw a line under it.

How do you become bankrupt?

A court can declare you bankrupt by issuing a 'bankruptcy order' after it's been presented with a 'bankruptcy petition'.

Filing your own bankruptcy petition

A form (a debtor's petition) can be downloaded from the Insolvency Service website or obtained from county courts with bankruptcy jurisdiction.

When completed the form should be taken to the county court nearest to you that has bankruptcy jurisdiction. A fee of £150 is payable, although this can be waived if you meet specific criteria, when you file the petition.

A deposit of £345, for the Official Receiver's work, is also payable at this time. This amount cannot be waived.

Insolvency Service - Online forms service Opens new window A creditor making you bankrupt

Your creditors can present a creditor's petition if you owe them an unsecured debt of over £750.

Once bankruptcy proceedings have started, you must co-operate fully even if it's a creditor's petition and you dispute their claim. If possible you should try to reach a settlement before the petition's due to be heard - doing it later can be difficult and expensive.

Alternatives to bankruptcy

Bankruptcy is a serious matter - you'll have to give up possessions of value and the interest in your home. However, you don't have to become bankrupt just because you're in debt. You can try to make arrangements with your creditors instead - including:

informal agreements - you write to your creditors and try to agree a repayment timetable

individual voluntary arrangements (IVAs) - an insolvency practitioner helps you negotiate repayment terms

administration orders - a county court orders you to make payments to the court, which the court then distributes amongst your creditors

Dealing with debt problems Read more about the alternatives to bankruptcy Opens new window Where is a bankruptcy order made?

Bankruptcy petitions are usually presented in the High Court in London or at a county court near where you live or trade (although not all deal with bankruptcy petitions).

Who deals with your bankruptcy?Official Receiver

An Official Receiver is appointed to protect your assets. They act as trustee of your bankruptcy affairs if you have no assets.

Insolvency practitioner

If you do have assets, an Insolvency Practitioner will be appointed to act as trustee and sell your assets to pay your creditors.

Find an authorised insolvency practitioner Opens new window Once a bankruptcy order has been made against you, your creditors can no longer pursue you for payment. Payment becomes the responsibility of the trustee.

How bankruptcy affects youAssets

Once you're bankrupt, the Official Receiver, or appointed trustee, can sell your assets to pay your creditors. However, certain goods aren't treated as assets for this purpose, for example:

equipment you need for your work (eg, tools or vehicles)

household items needed by you and your family (eg, clothing, bedding and furniture)

Earnings

The Official Receiver can look at your income (taking into account expenses such as your mortgage, rent and household bills) and decide if payments should be made to your creditors.

You may be asked to sign an 'income payments agreement' to pay fixed monthly instalments from your income for three years.

If you don't pay (or if you don't sign the agreement voluntarily), the Official Receiver can apply for an income payments order from the court to order you to pay - running for at least three years from the date of the order.

If your circumstances change, you'll need to tell the Official Receiver, so they can review these arrangements.

Ongoing commitments

You'll still have to meet ongoing commitments such as rent or debts incurred after you become bankrupt.

Your obligations when you're bankrupt

You must:

give the Official Receiver details of your finances, assets and creditors

look after your assets and hand them over to the Official Receiver with the relevant paperwork, such as bank statements and insurance policies

tell your trustee (either the Official Receiver or insolvency practitioner) about any new assets or income during your bankruptcy

stop using credit cards and bank or building society accounts

not obtain credit over £500 without telling the creditor that you're bankrupt

not make payments direct to your creditors (there are exceptions to this, such as mortgage arrears and outstanding child support payments)

You may also have to go to court and explain why you're in debt.

How long does bankruptcy last?

Bankruptcy normally lasts for one year. After this time, you'll be 'discharged' from your bankruptcy regardless of how much you still owe.

Your discharge could happen earlier if you co-operate fully with the Official Receiver. However, in a small number of cases and if you've behaved irresponsibly (eg, not cooperating), bankruptcy can last for much more than one year.

Where to get help and advice

If you're thinking about declaring yourself bankrupt or you're being threatened with bankruptcy, it's important to seek independent advice.

Several agencies offer free help, including the Citizens Advice Bureau, National Debtline and the Consumer Credit Counselling Service (CCCS).

Citizens Advice Bureau (CAB)

Your local CAB is a good starting point for free advice. They provide free information and advice on legal, financial and other problems. You can find your local CAB in the phone book or on the CAB website.

Find your local CAB Opens new window National Debtline

National Debtline offers free, confidential and independent help over the phone for people in England, Scotland and Wales. You can call their helpline on 0808 8084 000 between 9.00 am and 9.00 pm from Monday to Friday and from 9.30 am to 1.00 pm on Saturdays (24 hour voicemail). You can also email them.

Contact details for National Debtline Free debt advice and information from National Debtline Opens new window Consumer Credit Counselling Service (CCCS)

The CCCS has a helpline providing free and impartial advice to people with debt problems. You can call their helpline on 0800 1381 111 between 8.00 am and 8.00 pm from Monday to Friday. You can also write to them.

Help and advice from the Consumer Credit Counselling Service Opens new window

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anyone would think this service was actually needed.

havent you heard? the Recoveraaaaaah is in full swing.

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Its a simple as this. You go into bankcruptcy. You do not take out any credit until the order has been discharged. You are obliged to tell certain people, but if they dont ask, you may decide to tell them at a more oportune moment. (Most people forget to tell their employees).

The not getting paid bit is going to be a bit of a giveaway I think.

Edited by Soon Not a Chain Retailer

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Something I've never really understood is why a creditor would want to make you bankrupt - doesn't that basically ensure that they get bugger all? Or does being the creditor that petitioned for bankruptcy give you the first slice of the pie?

easy, if you have assets that are not cash, bankruptcy will put the taxman at the first bite, secured creditors second and the rest go hang.

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Something I've never really understood is why a creditor would want to make you bankrupt - doesn't that basically ensure that they get bugger all? Or does being the creditor that petitioned for bankruptcy give you the first slice of the pie?

Unless they're idiots (and there's always a lot of those) its usually done on a 'pour encourager les autres' basis. ie to send a message to everyone else to pay their debts.

As for the idiots, I know of one case where someone brought a bankruptcy petition only to be bankrupted themselves paying the legal fees in doing so.

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easy, if you have assets that are not cash, bankruptcy will put the taxman at the first bite, secured creditors second and the rest go hang.

HMRC no longer have priority status. They changed it, possibly under the 2002 enterprise act, not sure what the wisdom of this was other than basically gifting tax revenue to banks. TBH the govt is very fond of that sort of thing it seems.

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HMRC no longer have priority status. They changed it, possibly under the 2002 enterprise act, not sure what the wisdom of this was other than basically gifting tax revenue to banks. TBH the govt is very fond of that sort of thing it seems.

ah yes, I remember now, thanks for reminding me.

It may have been a move to slow the ton of bankruptcies made by HMRC in the High court.

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Something I've never really understood is why a creditor would want to make you bankrupt -

They don't! I know someone with 16k thereabouts not paid a penny for months, he wrote and asked for a full and final settlement figure off them, telling them he'd go bankrupt and none of them could be bothered to reply.

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They don't! I know someone with 16k thereabouts not paid a penny for months, he wrote and asked for a full and final settlement figure off them, telling them he'd go bankrupt and none of them could be bothered to reply.

The whole receivership/administration process seems to be of little use to anyone other than making accountants richer. If we get a debtor go bust we don't usually put a great deal of energy into replying unless there's a significant amount of stock we've got retention of title on. In most cases nothing is ever returned to creditors so it's just a waste of time responding.

Alternatively, if a supplier goes bust and the administrators write to ask us to pay any outstanding invoices we don't usually bother either and they don't chase we just, in most cases, effectively get a free stock windfall.

The chap on here who is an IP will probably be outraged by this assessment. However, in my experience, adminstrators/receivers just ineptly sell-off assets, they've basically been gifted, at well below market value in whatever is the quickest most convenient way and are only really interested in raising enough money to cover their own fees.

I, personally, think the whole system needs massively overhauling. Most revenue would probably be raised if the incumbent directors were hired on a commission basis to sell off the assets.

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I, personally, think the whole system needs massively overhauling. Most revenue would probably be raised if the incumbent directors were hired on a commission basis to sell off the assets.

That's what they do with chapter 11 in the US. Basically instead of giving any money to the people they owe, the bankrupt people pay themselves handsomely and use up whatever is left.

Labour would probably be in favour, it's all about fairness you see.

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That's what they do with chapter 11 in the US. Basically instead of giving any money to the people they owe, the bankrupt people pay themselves handsomely and use up whatever is left.

Labour would probably be in favour, it's all about fairness you see.

not only that, chapter 11 is temporary. I heard today its 90-120 days for GM to sell off whatever they need to or reorganise.

cant see myself how this is going to end up good for anybody, but it has been due for YEARS and so it will draw a line under many hopes and fears.

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Based on some of the, not unsurprising when thought about, things I have learnt/seen/heard over the last year I would say sod bankruptcy - just 'disappear'. Surprisingly easy, especially for single people. That doesnt necessarily mean leaving the country either - just dont respond to ANY communications from your creditors (e.g change your phone number, return letters marked 'no longer at this address', remove oneself from the electoral role). Its especially easy for those who hold a second nationality (i.e second passport).

Live like this for the 6 or whatever years, then 'reappear' as your original self (if you can be bothered to do so by then).

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snip........

The only downside to this route that I can think of is that, once you have acknowledged/proven you're still alive and well AND HERE and given your personal details to the court (i.e National Insurance number, etc), an attachment to earnings could be issued to cover the event that you do commence paid employment at some point in the future ?? within the statutory time limitations for debt??.

No it can't. The Court can only attach earnings at the time the order is made, which is before the bankruptcy is discharged, which in normal cases is prior to the 12 month anniversary of the initial bankruptcy order. In any event attachment orders are time limited (up to 3 years) and can only attach a percentage of disposable earnings after discounting normal living costs.

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If you have debt problems, you may be thinking about the possibility of bankruptcy. It's important to understand what bankruptcy is, and what alternatives exist. Bankruptcy isn't permanent, so you may choose it as a way of clearing your debts and making a fresh start.

<snip>

Can I take it from this wealth of knowledge that you have about bankruptcy, you have been made bankrupt yourself at some point? If so, when?

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Guest eight
Based on some of the, not unsurprising when thought about, things I have learnt/seen/heard over the last year I would say sod bankruptcy - just 'disappear'. Surprisingly easy, especially for single people. That doesnt necessarily mean leaving the country either - just dont respond to ANY communications from your creditors (e.g change your phone number, return letters marked 'no longer at this address', remove oneself from the electoral role). Its especially easy for those who hold a second nationality (i.e second passport).

Live like this for the 6 or whatever years, then 'reappear' as your original self (if you can be bothered to do so by then).

What if you have no income or assets? That might as well be "disappearing" as far as creditors are concerned. What do they do then?

eight

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The OP should come with a surgeon general's warning sticker - "warning: bankruptcy increases the chances of long term unemployment".

Take it from someone who is currently enjoying "70's style wage inflation".

(if you've not been on the interview circuit in the last three to six months, you'll be quite surprised about the level of background being done on candidates for so-called "professional" roles)

Edited by ParticleMan

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What if you have no income or assets? That might as well be "disappearing" as far as creditors are concerned. What do they do then?

eight

If you literally have no income or assets at all (or have thoroughly 'hidden' them well in advance), then no need to disappear or hide from anyone. No need to even scrape together the bankruptcy fee. The creditors will 'take you to court', you willingly turn up at the set date, hold your head high and proud and explain/prove your sorry circumstances to the relevant clerk(s). The court cant even issue an attachment to earnings if you are not working or (in two cases I learnt of) not even claiming any form of benefits (i.e living off 'goodwill' and 'charity' of others).

The only downside to this route that I can think of is that, once you have acknowledged/proven you're still alive and well AND HERE and given your personal details to the court (i.e National Insurance number, etc), an attachment to earnings could be issued to cover the event that you do commence paid employment at some point in the future ?? within the statutory time limitations for debt??.

By opting to ignore ALL the creditors attempts to establish your whereabouts (and indeed if you are even still alive!), they cannot go to a judge and demand judgement and penalties be handed down by default. Despite New Labours best attempts, we still have some vestiges of 'fair play' and ancient rules (Habeus Corpus, etc). A court will not enact penalties against someone who might be lying dead in a ditch in gawd knows where! The creditors will write off the debt and get something back from their insurers. IF you 'turn up' too soon you will be flagged up and they will start again.

Changing name by deed poll (and notifying the relevant govt dept managing your National Insurance number) is not difficult. After changing your name, you apply for the name to be changed on your passport. Get your driving licence details changed too, as this is used as a de facto ID card these days for most things (such as opening bank acounts!). A little devious imagination goes a long way so I have been made to realise.

Now, 10 years ago I would have frowned upon these sorts of shenanigans, but today after seeing the actions of the banking system (e.g making unsecured debt effectively secured via charging orders, etc) and also being enlightened to the wide and varied circumstances that many (through just bad luck in some cases) get into unmmanageable debt - I say good luck to anyone who wants to take the risk in doing any of the above.

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Guest eight
Now, 10 years ago I would have frowned upon these sorts of shenanigans, but today after seeing the actions of the banking system (e.g making unsecured debt effectively secured via charging orders, etc) and also being enlightened to the wide and varied circumstances that many (through just bad luck in some cases) get into unmmanageable debt - I say good luck to anyone who wants to take the risk in doing any of the above.

I agree with you on this. If banks wish to change the status of a debt from unsecured to secured via a charging order they should at least be made to recalculate any interest over the whole history of that debt to more typical secured rates for the period concerned.

It's my guess that in most cases it would turn out that the original principal had already been repayed many times over.

eight

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No it can't. The Court can only attach earnings at the time the order is made, which is before the bankruptcy is discharged, which in normal cases is prior to the 12 month anniversary of the initial bankruptcy order. In any event attachment orders are time limited (up to 3 years) and can only attach a percentage of disposable earnings after discounting normal living costs.

Much obliged. Bit by bit I become more and more informed - almost to the point where I'm tempted to try it myself. :D

If what you say is correct then, in the case mentioned where one can demonstrate (empahasis again on 'demonstrate' and not 'actually have'!) literally no meaningful assets such as car or home or income, 'hiding' is unlikely to be necessary - just turn up at court, plead poverty, and go back home and sleep well.

Edited by anonguest

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I'd be interested in knowing what sort of offer of one-off payment the banks/credit card companies would accept from someone who has no assets (therefore, not worth bankrupting). You hear about these companies offering to consider one-off payments of a percentage of the balance, then cancelling the rest - what percentage should be offered?

It's for a friend, honest, not me!! Actually, my friends are the parents of someone who has got herself into debt trouble. The parents would be the source of the funds for their daughter's one-off payment, so I'd like to offer them some advice on what amount to offer. Any ideas? Or should I tell them to go look on (gasp) MSE?

Edited by MacGuffin

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The insolvency practitioners are by and large a pretty dishonest bunch of vultures. They're not inept at selling assets but like to appear so. They usually have a large flock of "contacts" floating around them. Nowadays of course they can always resort to "prepacks". These are pre-arranged administrations that sell the business assets for peanuts, often to the existing owners so they can start again without any liabilities.

If someone attacked you in the street and took a few pounds from you they would be thrown in jail. Whereas this bunch of parasites will take an individual for thousands and corporates for millions with legal impunity. Their fees get paid first, secured creditors next, and finally unsecured creditors. Although if they act normally there usually isn't enough for the secured creditors.

As for the official receiver, they're the guys who aren't anywhere near good enough to be insolvency practitioners.

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