Bankruptcy

Bankruptcy is the formal term under the insolvency act for declaring an individual insolvent through a court process.

A bankruptcy order will be made by a court if it is satisfied that the individual is insolvent.  An ‘application’ for a bankruptcy order follows a petition, which can be presented by a creditor, the individual themselves or by the supervisor of a failed IVA.

Once an order is granted it must be advertised in The London Gazette. The assets of the bankrupt fall under the control of a Trustee in Bankruptcy – either the Official Receiver or a licensed insolvency practitioner.  The Official Receiver is appointed in the first instance and will decide if there are sufficient assets to cover administration costs.  If there are, then an independent licensed insolvency practitioner will usually be approached to be appointed as Trustee.  Major creditors can have input over the appointment of a Trustee.

The trustee is responsible for realising the bankrupt’s assets and distributing the proceeds to creditors in order of priority.  Any assets held, including a house, must be realised. The law does, however, allow a period of 12 months for the bankrupt’s family to make alternative arrangements, before it will order the property to be sold.   In many cases, the trustee will firstly ascertain the level of equity in the property and ascertain if the bankrupt individual wishes and is able to purchase the interest.  This could be from family funds, a third party, or an increased mortgage.

The bankrupt is usually allowed to keep basic furniture and in certain circumstances a car. An un-discharged bankrupt is subject to certain restrictions, which can make life difficult.

The full bankruptcy procedure can be explained by a member of our team. We can also advise on life after bankruptcy on issues such as your credit rating and mortgages. Dodd Rescue can recommend an IFA who specialises in this area.

Disputes sometimes arise between individuals and their Trustee in Bankruptcy or the supervisor of their IVA. We can offer advice and assist in negotiations. Please contact a member of our team.