This section covers the most common questions and answers for anyone thinking of going bankrupt.

We also have a 'Bankruptcy Support' section which covers in more detail;

*  The consumer bankruptcy forms and their key points

*  Finding the bankruptcy fee

*  Getting the timing right & a new bank account

*  Finding the right court

*  What happens at court?

*  The Official Receiver’s (OR’s) interview

*  Income Payment Agreements (IPAs)

*  Post bankruptcy, your creditors

*  Will my name be in the local paper?

*  Bankruptcy /debt jargon

Take me to Bankruptcy Support

The most common questions and answers for consumer bankruptcy

How much does it cost to go bankrupt?

From June 1st 2011 it is £700 per person in England & Wales.

The bankruptcy fee comprises two sections - the Official Receiver’s fee of £525 paid to The Insolvency Service and the Court fee of £175, total £700.

If you can demonstrate that you are on benefits then you may be exempt or pay a reduced court fee.

Payment of the fees can be either in cash, postal order, a bank, building society, solicitor’s or charity cheque, and made payable to H M Paymaster General. Not surprisingly the Court does not accept personal cheques or credit card transactions!

DebtWizard has in the past corresponded with the Prime Minister over the high cost consumers have to pay to petition for their bankruptcy and as result the government is reviewing alternative ways of meeting the fee. You can read Mike’s letter to the PM here - Government to review the cost of consumer bankruptcy fees

Will my name, address and occupation be advertised in the local paper?

As from the 6th April 2009 most honest and co-operative consumer bankrupts will not be advertised in the local paper. Those bankrupts that are seen not to co-operate or not reveal all their assets or liabilities may still be advertised, plus any other cases that the Official Receiver feels warrants public interest.

More on this can be found here; Massive unreported change in bankruptcy policy.

Will I be able to keep my house?

If you own your home and not renting then your home will be seen as an asset and will become part of the 'bankrupt’s estate' and will, subject to certain exceptions already in place, be controlled by the OR or Trustee as necessary. The Act however changes the way the dwelling house is dealt with, briefly:

Trustee in bankruptcy has 3 years from the date of bankruptcy to deal with the bankrupt’s interest in his/her sole or principal dwelling house, the bankrupt’s spouse or former spouse, following which period it will revert back to the bankrupt, in other words it will no longer be a part of the bankrupt’s estate unless the trustee;

• applies for an order of sale or possession.
• applies for a charging order to cover the value of the interest.
• realises the interest.
• reaches an amicable agreement with the bankrupt regarding the interest.

There are occasions whereby you can keep the house, usually this is when there is little equity (the difference between the mortage and the value of the home). You will need to get advice.

Where can I get help and advice to see if bankruptcy is right for me?

We can help you work out what is the best solution to your current debt problem, we offer Fee-free Debt Management Plans/IVAs and free debt advice.

It is important to remember that every instance must be decided upon its merits. What has proven to be right for one individual may not necessarily be correct for another. Age, working potential, assets and implications are all factors that need to be considered carefully before selecting bankruptcy.

REMEMBER, it is not a crime to be in debt - always insist that you are treated with respect.

Why change the bankruptcy legislation?

Under the old rules the bankrupt would have been discharged after 2 years if unsecured debts were below £20,000, and 3 years if over 'that amount'. The restrictions placed on the individual included making it a criminal offence for an undischarged bankrupt to

• Obtain credit of £250 or more, either alone or with another person; this also covers obtaining credit by a statement or conduct.
• Managing a Limited company directly or indirectly, or acting as a company director without the leave of the Court.
• Many professionals believed that the old legislation was too draconian and did not reflect on today’s society and needs. For example an individual that has been made redundant from his/her occupation and is unable to secure full time employment thereby preventing him/her for servicing their unsecured debts are, in effect, treated exactly the same as an individual that has been culpable and reckless in their borrowing and who had set out with no intention of ever paying his/her creditors.

What are the key points of the new legislation?

Under the Enterprise Act 2002, those made bankrupt after April 2004, will generally be discharged after 1 year, less in some circumstances for example where the bankrupt has cooperated with the Official Receiver, “OR”, and or Trustee and matters relating to the bankrupt’s conduct and affairs has not been raised by creditors. The OR can file a notice at Court detailing that the investigation of the bankrupt’s affairs has been concluded or is unnecessary. In some instances it is proposed that the bankrupt will be discharged upon the date the notice is filed into court and this could be a matter of weeks.

The bankrupt will not be discharged if there is a Court order suspending his or her discharge. This will be made if the bankrupt has not cooperated with the OR or Trustee in bankruptcy, then the term will be extended.

What are my restrictions as a bankrupt?

You will be required to:

• Not take on any further credit of £500 or more without informing the lender that you are bankrupt.
• Stop using your bank account and any credit cards etc immediately. The Official Receiver will guide you as to what type of account you may hold. This is usually a basic account. Click here for more information on bank accounts.
• Cooperate with the Official Receiver. You may well be asked to attend his/her office for interviewing, in some instances this can be done over the telephone.
• Notify the OR of any windfall or financial gain during the bankruptcy.
• The OR may also place other restrictions upon you.

What is a Bankruptcy Restriction Undertaking, BRU?

This is new and imposes restrictions on a bankrupt whose conduct has been negligent or reckless. These will generally apply after the bankrupt has been discharged and can run for between 2 and 15 years. Examples of being negligent or reckless would be gambling, borrowing money knowing you cannot afford to repay it, paying off family and friends in preference to the lenders that would feature in your bankruptcy .

What is an Income Payment Agreement, IPA?

This is new under the Act and imposes a legally binding written agreement between the bankrupt and the Official Receiver or Trustee that requires the bankrupt, or a third party, to make specified payments to his or her Trustee for a specified period. This will be enforceable as if it was an IPO made by the Court. An IPA will detail the period for which it is to have effect and that the period can apply after the bankrupt has been discharged. The agreement will not extend more than three years after the date of the IPA. The IPA can be varied in writing.

What about those that went bankrupt before 1st December 2010?

Those bankrupts that currently have an IPA and have a change in circumstances, i.e. they have an increase in wages then they will be reassessed under the OLD policy and will not be subject of the new regime.

However those that are bankrupt before the 1st December 2010 and have not been subject to an IPA and experience a change in circumstances that then produces a DI above £20 then they will be subject to the NEW regime where anything above £20 will be taken.

Anyone going bankrupt from the 1st December 2010 onwards will be subject to the new policy of payment of 100% of any disposable income (DI) above £20.

What is an Income Payment Order, IPO?

Upon the application from the Trustee in bankruptcy the Court issues an order that the bankrupt makes a payment to the Trustee in contribution towards his or her debts, this order will usually last for 3 years. These orders are generally not contested and can only be varied upon application to the Court by either the Trustee or bankrupt.

Will there be an increase in the numbers petitioning their own bankruptcy?

Most definitely, with the current economic crisis many consumers cannot service their unsecured borrowing. We have a list of individual insolvencies (bankrupts and IVAs) in England and Wales since 1960 to present date.

See Bankruptcy and IVA chart 1960 to present date.

How do I go bankrupt?

You are either made bankrupt by a creditor/lender or you do this yourself. See our Bankruptcy Support section

What is the procedure?

After taking professional advice and you still wish to petition your bankruptcy then you will need to get the forms from the county court and fill them out by hand. We cover this in our Bankruptcy Support section.

Filling out the bankruptcy forms

The filling of the forms on-line is is being stopped on the 3rd September 2010.  However, the Microsoft Word versions of the forms will still be available to download and print off, we show you how to do this in our Bankruptcy Support section.

What alternatives are there other than bankruptcy?

An Individual Voluntary Arrangement (IVA). An IVA is a process of clearing your unsecured debts such as, credit and store cards, personal loans, payday loans, bank overdrafts and mortgage shortfall following house repossession.

We help you work out what you can afford to pay each month. Once approved then all interest and charges will be stopped and you are protected from any legal action from those lenders that feature in your IVA.

If you decide that you do not wish to go bankrupt and according to your circumstances you may be able to propose an IVA, this means that you could be debt free in 5 years, to find out if you qualify then telephone 0800 197 8433 8am - 9pm or complete the rapid response form and we will call you.

We have more on IVAs here;

What is an IVA? IVA information IVA pros and cons

You may also be able to propose a debt repayment plan or debt management plan to your creditors.

If you live in Scotland then you may also be able to propose either a Scottish Trust Deed or a debt repayment plan under the Debt Arrangement scheme

Where can I get help and advice to see if bankruptcy is right for me?

We can help you work out what is the best solution to your current debt problem, we offer Fee-free Debt Management Plans/IVAs and free debt advice.

It is important to remember that every instance must be decided upon its merits. What has proven to be right for one individual may not necessarily be correct for another. Age, working potential, assets and implications are all factors that need to be considered carefully before selecting bankruptcy.

REMEMBER, it is not a crime to be in debt - always insist that you are treated with respect.

Need to ask a question about bankruptcy? If so then go to our debt help and IVA forum

Podcast

DebtWizard explains in the podcast below (6 mins 59 sec) the procedure for consumers to go bankrupt, what happens at court, an example of how a bankrupt can still keep their home.

Also why you no longer have to pay the lenders that feature in the bankruptcy, how the calculation is made to determine if you can pay the Official Receiver for a period of three years and whether your name and address is to be advertised in the local newspaper.

In the final section Mike details the types of debt that can be included in a bankruptcy, the cost to go bankrupt as at June 1st 2011 and how society is changing over the stigma of consumer bankruptcy.

More podcasts available on Debt Management Plans, Individual Voluntary Arrangements (IVAs), Budget Wizard and Forum - All podcasts.