What Happens After Bankruptcy?

Our previous article was entitled ‘How to go Bankrupt’. This article looks at the aftermath of becoming bankrupt. After the court makes a Bankruptcy Order against a debtor, the Official Receiver immediately takes over the responsibility for administering the bankruptcy including the task of protecting the bankrupt’s assets. The Official Receiver is a civil servant in The Insolvency Service and is an officer of the court and acts as the bankrupt’s trustee unless the court appoints an Insolvency Practitioner (IP) to take that role.

The trustee in bankruptcy is responsible for looking after the financial affairs of the bankrupt for the period before and during the term of the bankruptcy and must report to the court any matters which indicate that the bankrupt may have committed criminal offences in connection with the bankruptcy. For more information regarding the bankrupt’s dealings with the Official Receiver in England and Wales, look up The Insolvency

Service website at www.curadebt.com/insolvency and read the downloadable publication ‘What happens when you are interviewed by the Official Receiver? For Northern Ireland look up the website of The Insolvency Service of Northern Ireland www.curadebt.com/freeconsultation

Bankruptcy imposes certain mandatory duties on the bankrupt. To begin with you must provide information to the Official Receiver about your financial affairs as soon as possible after the Bankruptcy Order is made and you may also have to attend an interview at the OR’s office at a later date.

You must collect and hand over to the Official Receiver all your account books, records, bank statements, insurance policies and other papers relating to your assets and debts. If you receive any assets or any increases in income during the term of your bankruptcy, you must tell your trustee as soon as possible. You must stop using your bank and building society accounts, credit cards and similar accounts straight away. You must not get credit of £500 or more from any person without first telling them that you are a bankrupt. You must not make any payments to your creditors for money that you owed before the Bankruptcy Order was made.

There are sanctions for not co-operating with your trustee and you could be arrested. Generally you will be automatically freed from bankruptcy (discharged) after a maximum of twelve months. Of course if the court should annul (cancel) your Bankruptcy Order at any time, you will become automatically free from bankruptcy; this would normally happen where your debts and the fees and expenses of your bankruptcy have been paid in full or where the Bankruptcy Order should not have been made in the first place.

However, in some cases your discharge from bankruptcy could be suspended (postponed). For further information in England and Wales, look up The Insolvency Service website at www.nationaldebtreliefreview.com/insolvency and read the downloadable publication ‘When will my bankruptcy end?’ For Northern Ireland look up the website of The Insolvency Service of Northern Ireland www.detini.gov.uk

Annulment of Bankruptcy

In the world of personal insolvency the annulment procedure applies to bankruptcy only. Only the court has the power to order the annulment or cancellation of a bankruptcy order that has already been made.

Annulment releases the bankrupt from the restrictions placed on him or her by insolvency law and renders him or her no longer bankrupt with immediate effect. Annulment can be sought at any time, even after the bankrupt has received discharge from bankruptcy.

Why would a bankruptcy order be annulled? There are three principal reasons chief of which is that there was a valid reason why the bankruptcy order ought not to have been made in the first place. The second reason is that the debts and expenses of the bankruptcy have either been paid in full or secured to the satisfaction of the court. The third reason is that the bankrupt has with the approval of creditors entered into an Individual Voluntary Arrangement (IVA) or into a Fast-track Voluntary Arrangement (FTVA).

Generally the bankrupt (or representative) must apply to the court for an annulment of the bankruptcy order. One exception is where the petitioning creditor’s solicitor makes the application in circumstances where their client failed to notify them that the debt had been paid in full prior to the bankruptcy. The court then sets a date for the hearing.

Visit the website of The Insolvency Service Website for a full description of the process of annulment of a bankruptcy order and find the section entitled Annulments, Rescissions and Recalls.

Qualifying for a Debt Relief Order

It is relatively easy to determine if you are eligible to apply for a Debt Relief Order. First of all you must be currently resident in England or Wales or, at any time in the last three years, have been resident or carrying out business in England or Wales. A Debt Relief Order is an informal insolvency process that has been designed specifically for people who are unable to pay their debts which in total must not exceed £15,000. To apply for a Debt Relief Order there are other conditions you must fulfill.

The first condition is that you have no assets. What this means in practice is that your total gross assets must not exceed £300 apart from a vehicle necessary for travelling to your work or for your domestic needs and which may have a value of up to £1,000. Your surplus income, i.e. what you are left with when you have paid your normal living expenses, must not exceed £50 per month. There must be no other access to debt relief open to you and there must be no prospect of your financial situation improving.

A Debt Relief Order is not an appropriate situation for you if you have assets or if there is a possibility of an improvement in your financial circumstances.

If you have already been subject to a Debt Relief Order within the last six years, then you are ineligible to apply for another one.

You are also ineligible to apply for a Debt Relief Order if you currently involved in another formal insolvency procedure such as bankruptcy, an individual voluntary arrangement, a bankruptcy restrictions order or undertaking, a debt relief restrictions order or undertaking or an interim order. You are also ineligible for a

Debt Relief Order if you are currently petitioning for bankruptcy (unless the court has referred you to the Debt Relief Order procedure as a more suitable method of debt relief) or if a creditor is currently petitioning for your bankruptcy (unless that creditor has given you permission to apply for a Debt Relief Order.

If you believe you are eligible for a Debt Relief Order, then you must seek advice from a debt advisor, who will help you to apply to The Insolvency Service which together with skilled debt advisers, called approved intermediaries, run the system of Debt Relief Orders. You cannot apply for a Debt Relief Order without the assistance of an approved intermediary. The cost of a Debt Relief Order is £90 which can be paid upfront immediately or if you cannot afford to pay immediately, can be paid over a maximum of a six months period. Once the fee is paid in full, the official receiver will consider your application.

Once the Debt Relief Order is granted, your creditors cannot take any action against you for repayment without the permission of the court. After twelve months, your debts, as listed in the Debt Relief Order, are discharged, leaving you free of those debts forever.

While in a Debt Relief Order you are subject to certain restrictions and of course there are certain debts that cannot be entered into a Debt Relief Order. As well as that, details of your Debt Relief Order are put up on the website of The Insolvency Service and are removed three months after your Debt Relief Order has ended.

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