Bankruptcy

Bankruptcy:

Bankruptcy is an important solution, helping over indebted clients deal with the debts
they are unable to pay, having explored all other options. The bankruptcy
proceedings have the following two main objectives:

  • To free the debtor from overwhelming debts so they can make a fresh start, subject to some restrictions;.
  • To make sure the debtor’s assets are shared out fairly among creditors.

Bankruptcy is the only way that the debtor can force their creditors to accept less than is owed to them, but because of the far-reaching implications of bankruptcy, it is generally viewed as a solution of last resort.

Some debtors would not be advised to petition for their own bankruptcy due to the negative impact this would have on their employment status:

  • Police officers
  • Members of the Armed Forces
  • Professionals, e.g. solicitors, accountants who would lose their license to practice
  • Company directors
  • MP’s
  • Financial Services -Advisers

This list is not exhaustive and we would always advise a debtor who is
considering bankruptcy to check their contract of employment

DEBT EXCLUSION

Certain debts will still have to be paid by the debtor:

  • Marital Settlements
  • Unpaid court fines
  • Student loans

Bankruptcy costs and fees in the UK

In England and Wales:

  • the application fee is £130 and
  • the bankruptcy deposit is £550

In Northern Ireland:

  • the court fee is £127,
  • the bankruptcy deposit is £525, and
  • there is a solicitor’s fee of £7
If you live in Northern Ireland and you‘re on a low income or receive certain benefits, the court fee may be waived. Whatever your circumstances the bankruptcy deposit always has to be paid.

Once you’ve petitioned for bankruptcy, the official receiver assigned to deal with your bankruptcy will look through your finances and decide if you need to pay anything towards your debts. You may have to pay a monthly contribution towards your debts for up to three years. This is called an ‘income payment arrangement’ or IPA. It’s payable if you have an available income of more than £20 per month after paying your household bills and essential living costs.

The official receiver won’t make you pay anything towards your bankruptcy if you can’t afford to, and they’ll always leave you with enough money to live on each month.

If you have any valuable items, such as property, a vehicle, expensive items of jewellery or savings, the official receiver may arrange for them to be sold, and the money generated will be used to pay back some of your debts.

Bankruptcy costs in Scotland

  • Sequestration (Scottish bankruptcy): the Accountant in Bankruptcy fee is £200. There are no exemptions or restrictions to this, so the total fee amount needs to be paid in full
  • Minimal assets process (MAP) bankruptcy: £90 application fee, again with no exemptions

In Scotland, the Accountant in Bankruptcy may order you to make a payment each month for up to four years after sequestration. This is called a ‘debtors contribution order’ and is based on your ability to pay. You won’t be asked to pay anything after MAP bankruptcy.

In Scotland, the Accountant in Bankruptcy may order you to make a payment each month for up to four years after sequestration. This is called a ‘debtors contribution order’ and is based on your ability to pay. You won’t be asked to pay anything after MAP bankruptcy.

For more info on Bankruptcy refer to below link from Step Change;

https://www.stepchange.org/Howwecanhelpyou/Bankruptcy.aspx

THE FEATURES OF BANKRUPTCY

  • Any creditor who is owed more than £5000 can petition for the debtor’s bankruptcy
  • The debtor can apply for his / her own bankruptcy
  • The supervisor of a failed IVA can petition for the debtor’s bankruptcy
  • The debtor may be required to make contributions to his bankruptcy if they have any disposable income
  • Bankruptcy could be the best option for debtors who have no assets and a low level of income / income made up solely / mostly of State Benefits
  • As of April 2004, most debtors will get an automatic discharge after one year though, if awarded, income contributions may continue for up to three years
  • Bankruptcy is the only way a debtor can force his creditors to accept less than is owed to them
  • In bankruptcy control of all the debtor’s assets passes to the TIB who may dispose of these for the benefit of his creditors

THE BENEFITS FOR THE DEBTOR

  • The debtor would not be expected to relinquish personal belongings, tools of a trade, a modest motor vehicle, certain pensions or residential tenancy in bankruptcy
  • Income contributions may be awarded if the debtor has any disposable income, but these may be lower than the level that would be required to maintain an IVA and will not continue for more than 3 years
  • Debtors whose income is made up solely / mostly of State Benefits are unlikely to have to make income contributions
  • Bankruptcy may provide a much speedier resolution of the debtor’s financial
  • problems than other solutions

THE IMPLICATIONS FOR THE DEBTOR

During their bankruptcy the debtor may not:

  • Obtain credit of more than £500 without disclosing their bankruptcy
  • Carry on a business in a different name from the name in which they were made bankrupt
  • Act as the director of a company or take part in its promotion, formation or management without the court’s permission
  • Act as an insolvency practitioner or as the receiver or manager of the property of a company on behalf of debenture holders
  • Be a Member of Parliament in England or Wales
  • Act as a local councillor

RESPONSIBILITIES OF THE DEBTOR UNDER BANKRUPTCY

  • The debtor must not make payments direct to his unsecured creditors. If any creditor requests payment from him he must pass this on to the OR and tell the creditor that he is bankrupt.
  • The debtor must make income contributions to the OR if he has disposable income and there is an IPO or IPA in place
  • The debtor must provide information about his financial affairs to the OR
  • The debtor must collect and hand over his assets to the OR with any account books, records, bank statements, insurance policies and other papers relating to his assets and debts
  • The debtor must tell the OR about any assets and increases in income he receives during his bankruptcy
  • • The debtor must stop using his bank and building society accounts, credit cards and similar accounts straight away
  • • The debtor must not obtain credit of £500 or more from any person without disclosing that he is a bankrupt.
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Money Advice Service

To find out more about managing your debt and receiving free debt advice visit www.MoneyAdviceservice.org.uk

Further Additional Information

The insolvency service has produced a guide for people who are struggling with debt. This guide outlines each of the available solutions. You can download the guide by clicking the following link – In Debt? Dealing With Your Creditors.

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All debt solutions should be very carefully considered. Fees will be charged if a solution is taken in order for us to set up a plan and maintain it - all fees will be outlined during the consultation. Retained payment may place our client further into arrears. Acme Credit Consultants Ltd complies with the Consumer Credit Act and The client has the right to a cooling off period of 14 days. It is likely that their ability to obtain further credit in the short term will be affected and this may also be the case over the medium to long term.We DO NOT offer any lending services, we are a team of debt managers.Calls to our free phone number from mobile phones and other networks may be charged.

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