How will bankruptcy affect me?
How will bankruptcy affect me?
You must give the official receiver information about your financial affairs.
You should collect and hand over your assets to the official receiver. You should also hand over all your accounts books, records, bank statements, insurance policies, and any other papers relating to your assets and debts.
You must stop using any bank or building society accounts, credit cards and other similar accounts straight away.
Can I get credit?
During your bankruptcy you cannot ask for credit of £500 or more from anyone without telling them you are bankrupt.
Will my landlord be told I’ve been made bankrupt?
Your landlord will not be told of your bankruptcy as a matter of course unless you are in arrears with your rent, provided you have an assured, protected or secure tenancy.
You may need to show your tenancy agreement to the official receiver for them to establish the terms of the agreement. If your tenancy is not assured, protected or secure it is likely that the official receiver will contact your landlord. This is because the trustee of your bankruptcy estate may need to disclaim their interest in the property.
If I go bankrupt will it affect my employment?
You may not act as the director of a company or take part in its promotion, formation or management unless you get the court's permission to do so. You can apply to the court for permission but must tell the official receiver if you intend to do so.
You may be self employed or trade in partnership. If you carry on any business in a name that is not the name in which you were made bankrupt, you must tell everyone you do business with the name in which you were made bankrupt.
You may not act as an insolvency practitioner, or as the receiver or manager of the property of a company on behalf of debenture holders.
There are instances in legislation, regulations, bye-laws and private club rules of restrictions which refer to someone being a ‘fit and proper person’ which may disqualify an undischarged bankrupt. You would need to check if any of these affect you.
Further information about restrictions on bankrupts can be found by going to the following link:
Restrictions on Bankrupts Technical Manual Chapter25
Do I make any payments to my creditors?
You must not make any payments directly to your bankruptcy creditors for money you owed before the bankruptcy order was made.
You must still pay any debts that become due after you have been made bankrupt.
You must still pay any debts that cannot be included in your bankruptcy. See the question ‘Will all my debts be included in my bankruptcy?’
What happens to my assets?
When the bankruptcy order has been made all assets that you own automatically ‘vest’ in the trustee in bankruptcy. This means they become the property of your bankruptcy estate and you must not take any action to dispose of these assets.
There are some assets that this does not apply to. The official receiver will let you keep the following items, unless they can be replaced with a suitable and cheaper alternative:
- tools, books, vehicles and other items of equipment which you need to use personally in your employment, business or vocation;
- clothing, bedding, furniture, household equipment and other basic items you and your family need in the home.
All assets that you acquire before your discharge from bankruptcy also automatically vest in the trustee.
Will all my debts be included in my bankruptcy?
Certain debts cannot be included in your bankruptcy, these are:
- any fine under the Magistrates’ Courts Act 1980;
- any obligation under an order made in family proceedings or under a maintenance assessment made under the Child Support Act 1991 (except an obligation to pay a lump sum or to pay costs);
- any obligation under a confiscation order made under the Drug Trafficking Offences Act 1986, section 71 of the Criminal Justice Act 1988 or under Parts 2, 3 or 4 of the Proceeds of Crime Act 2002; or
- a debt to the Student Loans Company for loans under the Education (Student Loans) Act 1990 or The Education (Student Support) Regulations 1998.
This means that you will still have to carry on paying these debts and will not be released from them when you are discharged.
When I am discharged am I released from all the debts that were included in my bankruptcy?
No, there are some debts that you are not released from when you are discharged, even though they were included in your bankruptcy. They are included in the bankruptcy so that the creditor can be paid if you have assets that can be sold. Bankruptcy debts that you are not released from include:
- any obligation to pay a lump sum or to pay costs in family proceedings, whether or not there is an attachment of earnings order;
- any debt that you incurred through fraud or fraudulent breach of trust; and
- a liability to pay damages in respect of personal injuries to anyone.
Any secured creditor can still sell the asset upon which the debt is secured, even though you have been released from that debt.
What happens to my bank account?
Banks will always freeze your account when they hear about a bankruptcy order. This is not something the official receiver does. The official receiver will find out from the bank what is in the account. If they decide that you need the money in the account for necessary living expenses they will tell the bank to release it to you. The bank will then decide whether or not it will let you carry on using the account. Again, the official receiver is not involved in the decision.
For more details see the following leaflet: What will happen to my bank account? (DOC, 1.5 Mb)