What is debt?

How did we get here?

Prevention

Facing Facts

F.A.Q.

Link to Us

Advice

Bills Due

Mortgages

Credit Cards

Bank Loans

Bank Accounts

Court Action

Debt Collectors

Bailiffs

IVAs (Individual Voluntary Arrangements)

Bankruptcy

Pensions

Benefits

Savings

Relatives

Treasures

Case Studies

What do I do?

Credit Status

Useful Links

Your action plan

  Down with Debt

Informs - Advises - Educates - Unbiased - Free

Are you drowning in debt? Unable to pay your bills on time or at all? Getting angry telephone calls and letters? Worried over the future?

Learn how to cope, to regain solvency and control your personal or business finances

Bankruptcy

Bankruptcy is when a creditor petitions the High Court to have a person who is insolvent put into bankruptcy and their affairs handled by an "Official Receiver".

Insolvent in this context means your inability to discharge (pay) a debt, this does not mean you do not have enough saleable assets to meet this obligation, just that your cash flow or income has not allowed you to pay this creditor or you have ignored his demands for payment.

Part payments to a creditor can often delay or defer the issue of bankruptcy proceedings, so ever effort should be made to take this course of action as a priority, otherwise the consequences can be catastrophic on your personal and family life.

By far the biggest petitioner for bankruptcy is the Inland Revenue for non payment of taxes. Public bodies are frequent petitioners, however petitions by normal trade creditors to make a private person bankrupt tend to be limited to people with known personal assets which cannot be realised by traditional means.

It is not necessary to go to court to obtain a judgement for a debt before issuing a bankruptcy petition, provided you owe a significant sum £1,000 or more typically, however the petitioner must pay legal costs to issue the petition. The petitioner needs to be sure their costs can be redeemed from a successful case.

Faced with the "threat" (by talk or implied in correspondence) you have to consider;

• If you can or should try to pay off the debt in full

• Make part payment to delay proceedings

• If you have assets (owned solely or with others) which could pay the debt off in full or part if seized and sold

• If the creditor is bluffing and will not risk the costs and time scale of getting paid via bankruptcy

In practice this is another debt collection method and can often force the creditor to pay, which could be anytime from the issue of the petition to a few minutes before the court hearing. It is not unknown for cash to be paid over in settlement minutes away from the court ordering the creditor bankrupt.

A successful petition brought by one creditor effects all creditors, some of whom may have priory rights to payment from assets (Inland Revenue). Other creditors who are being paid by you may NOT wish a bankruptcy petition to succeed, it not being in their best interests and may wish to oppose the petition. This is unlikely to be a valid argument as the test is "can you pay the creditor the debt in full or not", if not you are insolvent and the petitioner entitled to a bankruptcy order.

Being bankrupt is to be avoided as it;

• Ruins your credit status for the long term, even after your discharge

• Stops you getting credit whilst bankrupt

• Means all your assets are sold even those that may be jointly owned

• May mean you loose your job or business as a consequence

Useful information

The Personal Insolvency Bureau - The bureau deals with people faced either with bankruptcy proceedings, already bankrupt or aware that they have serious financial problems and who don't know how to deal with bankruptcy.
http://www.insolvencybureau.co.uk/

Insolvency Service This is part of the Department of Trade and Industry and specialises in providing insolvency-related services.