Bankruptcy is a serious matter but even if you are deeply in debt it doesn’t mean you have to declare yourself bankrupt. Bankruptcy is a way of freeing you from debts you cannot pay so that you can make a fresh start with some restrictions. It will almost certainly involve the closure of any business you are involved in, dismissal of any employees and the loss of possessions of value and possibly your house if you have one. As other restrictions will be imposed you should look at the alternatives as soon as possible.

You can be made bankrupt in two ways

• By debtors’ petition. If you want to make yourself bankrupt, you must contact your local court where they will give you the details of the nearest county court dealing with bankruptcy. You will then pay a deposit of £250 plus a fee of £20.
• By creditors’ petition. Creditors owed at least £750 by you can raise a bankruptcy petition against you. They then present the bankruptcy petition at the High Court in London or at the County Court near where you live.

• Either the Official Receiver or an Insolvency Practitioner dealing with your case will act as a trustee of your estates. The Official Receiver is a civil servant of the court who will administer your bankruptcy. His duties include investigating your financial affairs for the period before and during your bankruptcy, and he reports back to your creditors.
• An Insolvency Practitioner must be licensed and is usually an accountant or solicitor and is responsible for disposing of your assets and paying off your creditors.

When you are made bankrupt

• Go to the office of the Official Receiver and give all the relevant information regarding your financial affairs.
• Within 21 days of being made bankrupt provide the Official Receiver with a list of all your assets and what you owe.
• Be responsible for handing over your assets, all your books, records, bank statements relating to your property and financial affairs.
• Give information about assets or increase in income obtained during your bankruptcy.
• Stop using your bank account, building society or similar account immediately.
• You must not try to obtain credit.

• The Trustees will arrange a meeting between you and your creditors to decide how much money will be shared out.
• It is important that you co-operate fully once bankruptcy proceedings are instigated against you.

• If you own your own home it may have to be sold to pay off some of the costs.
• In some cases a spouse may be able to put off the sale for up to a year. Spouses or joint owners should take legal advice as soon as possible.

• It is a criminal offence for you to obtain credit of £250 or more, either alone or with another person, without disclosing your bankruptcy. This also applies to hire purchases and rental agreements.
• It is a criminal offence to carry on your existing business in a different name without telling those you do business with that you have a bankruptcy order against you.
• It is a criminal offence to promote, form or manage a company without the court’s permission.
• You may not hold certain public offices.
• You can open a new bank or building society account but you must inform them that you are bankrupt. If you have more in your account than is necessary for normal living expenses, your trustees can claim the extra to pay your creditors.

Coming out of bankruptcy

• Normally you will automatically be discharged from bankruptcy after three years unless you have been bankrupted in the last 15 years. If you have failed to follow the bankruptcy instructions, the Official Receiver may order your discharge to be postponed.
• Once discharged, you are usually released from the debts that you owed at the date of the bankruptcy. Debts incurred through fraud, criminal activities or fines are exceptions.
• Once discharged, any assets you acquired before the date of the discharge may still be controlled by the trustees to pay off outstanding debts. Any assets acquired after discharge may be kept by you.
• You can be made bankrupt more than once. A second bankruptcy order after you are discharged from the first may have more serious consequences. You may also be prosecuted if you fail to disclose that you had been bankrupted before incurring new debts.

Bankruptcy Association of Great Britain and Ireland
01524 64305
Assists those needing help in bankruptcy, providing information and legal advice, especially to business people facing bankruptcy.

National Association of Citizens Advice Bureaux
0207 833 2181
Provides advice, information and practical assistance on a wide range of topics including debt, social security, employment, housing, consumer complaints and legal issues.

National Debtline
0808 808 4000
Provides a national telephone helpline to help deal with debt problems throughout the UK.