Process
A Court makes a bankruptcy order only after a bankruptcy petition has been presented. It is usually presented by:
- Yourself (Debtor's Petition); or
- Creditors who are owed at least £750 by you (Creditors' Petition)
A bankruptcy order can still be made even if you refuse to acknowledge or agree to the order. You should therefore try to co-operate fully once the bankruptcy proceedings have begun.
The Courts are officially responsible for making a bankruptcy order against an individual, although this is done at the request of either the individual or one of his/her creditors.
The assets of the bankrupt individual then fall under the control of a Trustee, This will be either the Official Receiver (a civil servant and officer of the Court), or a licensed Insolvency Practitioner. Whoever is appointed becomes responsible for uncovering as much as possible about the debtor’s assets and liabilities and then maximising returns for the creditors from the assets available, within certain guidelines.
Once a bankruptcy order has been made against you your creditors can no longer pursue you for payment. Payment becomes the responsibility of the Trustee.
The effects of bankruptcy
Once you have been made bankrupt all assets belonging to you come under the control of the Trustee, including your home.
If you live with a partner and/or children then a period of twelve months may be allowed for other living arrangements to be made. At the end of the twelve-month period, the property will almost certainly have to be put up for sale, enforced by a Court order if necessary. If you own the property with someone else they may be able to make an offer to buy out your interest in the property from the Official Receiver.
The other main disadvantages of bankruptcy are the restrictions placed upon you and the stigma of having to declare oneself as a bankrupt for certain transactions.