Individual Voluntary Arrangements
Bankruptcy should only be considered as a last resort and is only appropriate for people who have no assets, not expectations or requirement for credit or home ownership, and no prospect of repaying their debts in the short or medium term.
There are a number of alternative strategies to bankruptcy, for example:
- If you have equity in your home which exceeds liabilities, you may want to consider re-mortgaging.
- If total liabilities are less than £5,000 and you have County Court Judgements, you may qualify for an Administration Order.
- If you have disposable income of over £100 per month or more, than you may want to consider Debt Management Plans (DMPs) or Individual Voluntary Arrangements (IVAs).
The main purpose of bankruptcy is to liquidate assets and divide them (and any available income over and above an allowance to cover basic domestic needs) amongst creditors.
The advantages of bankruptcy include:
- Protection from creditors
- Discharge from debts, normally within 1 year of petition
- The administration of your debts handled by a 3rd party, thus avoiding future creditor contact.
The disadvantages can include:
- Loss of accommodation and possessions,
- Difficulty obtaining future credit. Even post-discharge, you may face difficulty in raising money to start a new business or buy a new home. It is a criminal offence for a bankrupt to obtain credit of over £500 without disclosing the fact that you are an undischarged bankrupt.
- If you have disposable income of £100 or more, you may be ordered to make regular monthly payments to an Official Receiver.
- An undischarged bankrupt cannot be a company director or be involved in the management of a company without leave of the court.
- Certain professions may be barred from practicing e.g. solicitors (who are barred under the Solicitors Act) and accountants (who may be barred under the rules of their professional association).
- If your circumstances change during bankruptcy e.g. increase in income or acquisition of property, you will be expected to report these to the Trustee.
- Creditors may still pursue the whole balance from a non-bankrupt party where the debts are jointly owned.
- Some debts cannot be included in bankruptcy.
- The bankruptcy will be advertised in the London Gazette and local newspaper.
Bankrupts are normally discharged within 12 months, unless you fail to co-operate with the Official Receiver/Trustee or the bankruptcy relates to a criminal matter.
