April 2016 saw a change in the application process for individuals declaring themselves bankrupt. Primarily, the process has been taken out of the courts and moved online,; a significant change intended to introduce a new- more streamlined-system for individuals looking to deal with unsurmountable debts.
The change ,motivated by the need to make filing for bankruptcy more efficient, makes the process less daunting for individuals who can benefit from doing a declaration. In addition, the costs to apply for bankruptcy have become more affordable having been reduced from £705 to £655. To further consolidate the process, the costs can be paid online and in instalments, though the application is not processed until the cost is paid in full.
- If you have declared yourself bankrupt prior to 6 April 2016, your application will still be heard at court under the old rules.
- If you submit or are in the process of making an application to the court after 6 April, it will not be accepted and you will need to apply online.
The creditors of indebted individuals must still apply to the court, however – a part of the system that remains unchanged. Although electronic automation of the process for individuals seeking to make themselves bankrupt is a sensible, pragmatic step for individuals, the process of having a third party declared bankrupt remains subject to judicial scrutiny.
The online form will request information regarding the applicant’s income, debts and outgoings. Once submitted with the £655 fee paid, the form will be passed to an adjudicator at the Insolvency Service who will review the application and make a decision.
When a decision for bankruptcy is made, a bankruptcy order is sent to the applicant and the bankruptcy process is handled by an official receiver, who will explain the details.. In some circumstances (usually when the applicant is in control of significant assets), an insolvency practitioner (accountant or solicitor) may be appointed by the creditors to deal with any such assets, in place of the official receiver.
When a bankruptcy order is made:
- The applicant must provide the official receiver with financial information and a full list of assets.
- The official receiver must be informed of any rise in income during the bankruptcy period.
The applicant must inform anyone who offers to loan them over £500.00 that they are bankrupt and inform their official receiver of the same.The official receiver and the assets.
The official receiver works for the Insolvency Service and is attached to the court.
The official receiver will be appointed as a trustee and will be in charge of selling any assets to manage debts, and will take care not to sell reasonable domestic items and items that are needed to do undertake day to day activites. The official receiver will be responsible for making any potential creditors aware of the position and inform them how the money will be shared.
A bankruptcy order usually ends after 12 months, provided you cooperation with the official receiver/trustee has been satisfactory throughout the term of the bankruptcy. A lack of cooperation could lead to being engaged in bankruptcy ‘indefinitely’.
Once ‘discharged’ from bankruptcy, the applicant is released from restrictions and most of the debts at the time the bankruptcy order is granted. This may happen automatically even if the creditors are not paid/paid in full and some assets are yet to be sold.
The applicant cannot be released from the following debts:
- Debts gained by fraud
- Money owned under family proceedings
- Student loans
- Damages payable for personal injuries
- Debts that commence after the bankruptcy order
Assets that are deemed part of the bankruptcy by the trustee at the end of bankruptcy order remain under the control of the trustee in order to allow for assets which can take time to be dealt with such as property.
Further Points after Discharge
- a letter or certificate as proof of discharge from bankruptcy will need to be requested.
- Credit rating agencies are not notified when the bankruptcy period ends. a request will need to be made to the agencies to update their records by providing them with a letter or certificate of proof of discharge. This typically stays on credit rating agencies records for 6 years.
There are, however, alternatives to bankruptcy which might be applicable to people who have “less substantial” indebtedness. If the applicant has no assets and owes less than £20,000.00 a Debt Relief Order can be applied for online. There are fixed criteria which must apply for this to be applicable, which centre on whether the assets held by the applicant are below £1,000 in value.
It is, therefore, not suitable for homeowners and people with other substantial assets but is an more informal process of dealing with smaller levels of debt.
This is a general guide on Bankruptcy.
It is advised to consult legal advice where there are concerns over the distribution of your assets and/or property.
It is also advised to seek legal advice if you believe a bankruptcy order should not be made.
Please feel free to contact us if you are undergoing or considering bankruptcy