Bankruptcy Laws in England and Wales

20 August2012

This isn't a legal document, but it is a rough guide to some of the things you could expect if you apply for bankruptcy in England or Wales. Different laws apply in Scotland and Northern Ireland.

First of all, your unsecured lenders cannot make you bankrupt unless you have a minimum debt of 750. Consider that the average amount of unsecured debt per household was 7,891 in May this year, according to Credit Action. Despite the high number of households with large unsecured debts in the UK, bankruptcies are actually decreasing, according to the Insolvency Service.

One reason they could be decreasing is because people are finding alternative ways to deal with debt problems, like the DRO or IVA route.

Who manages my bankruptcy?

First of all, before filing for bankruptcy, you should speak to a debt adviser to see whether it's the best option given your circumstances. It costs up to 700 to apply for bankruptcy in England and Wales, and if this is unaffordable for you there may be alternatives available. Bankruptcy also places financial restrictions on you for at least one year and stays on your credit record for six years.

However, for serious debt problems, it could offer a 'light at the end of the tunnel' and discharges you from your unsecured debt obligations after usually just 12 months.

You must go to court to be made bankrupt, and you aren't officially bankrupt until you're issued with a 'bankruptcy order'. However, bankruptcy is not a criminal matter and you do not attend a criminal court.

Once you are made bankrupt, the 'trustee' manages your valuable assets and financial interest in your home. The trustee may be an Official Receiver (a member of the bankruptcy court) or an IP (Insolvency Practitioner authorised to oversee bankruptcy cases).

Who will know about my bankruptcy?

If you did go bankrupt, you can choose who you tell in your personal life, although it may be difficult to keep something that has such an impact on your finances a secret.

Bankruptcies are listed on the Insolvency Register. This register is available to the public on the internet, but somebody would have to search for you specifically to find your name on there. Bankruptcies are also advertised in the London Gazette, a trade paper which lists all individual and business insolvencies in the UK, but is generally only read by people working in the financial services.

However, bankruptcy does stay on your credit record for six years. So, during that time, if you asked to borrow money from any other lenders, they could find out about your bankruptcy status with a simple credit check. Obviously this can make it very difficult to borrow money.

If you would like to speak to a debt adviser about bankruptcy or any other debt solutions, please click here.

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Tags: bankruptcy, bankrupt, law, Credit Action, DRO, Insolvency Service DRO, IVA

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