The Insolvency Service provides information about bankruptcy on their website. Please note that, when considering entering into bankruptcy of your own free will (known as a Debtors Petition), you will lose control of any assets. This would only be important if you had cash on account, or you owned an expensive vehicle or had a property in positive equity, but for most people this would not be a factor.
Our experience of the work we have completed here at bankruptcy.co.uk tells us that people consider personal bankruptcy once they realise there is no way out of a given financial predicament and it is causing sleepless nights. It may be that they have just had enough of being chased by Creditors, Debt Collectors and Bailiffs, and want to call time.
The Insolvency Service is the administration department that works on behalf of the Treasury to administrate the insolvencies in England and wales. The Adjudicator at the Insolvency Service receives the online application and assesses it much the same as Judges used to do at the courts. This in turn is passed on to an examiner the Local Official Receiver’s office who will assess whether anything can be done need to get the creditors’ money back. If you are made bankrupt and have assets such as a home with equity or a business, then the Official Receiver will appoint what is known as a trustee in bankruptcy who will perform these duties.
People looking for a fresh start need to know that if they enter into bankruptcy, they will be able to pick up the pieces and start again. People need to know their basic rights: Can I keep the tools of my trade if I am self employed? And what about my van and bank account? Will I lose these or can I keep them? And so on.
We provide clients with this information and empower them moving forward. We also provide the administrative function if this is required. We will manage the information and online forms submission process and provide information about other aspects of bankruptcy. In short, we will make the entire process transparent and less scary. We never instruct people; the decisions are down to the individuals themselves who have enough information to make an informed decision.
In many instances, we find debt advisors providing advice that is generally biased towards a Debt Management Plan or an Individual Voluntary Arrangement. This is usually because the firm itself will benefit from the fees charged and not because it is in the best interests of the client. We have come across countless cases of people with debts in excess of £20,000 who were placed in DMPs, when the correct course of action was bankruptcy. The debt will never be repaid under a DMP, let alone the interest.
IVAs are hardly any better. Here, debtors are placed into formal court-sanctioned arrangements which promise to wipe out up to 60% of the debt ‘using Government legislation’, but the reality only bites once the ink has dried. Sure, some of the debt is liquidated, but it is largely replaced by a fee structure than often ranges between £4,000 and £14,000. And then there are the annual reviews, designed to extract ever larger amounts from the client. Since most IVAs are arranged on a ‘low start’ basis, they can only ever hope to reach the desired goal if the monthly payments increase. A staggering number of those entering into IVAs abandon them after 24 months.
Something else which IVA companies tend to skim over when explaining these arrangements, is the position of those persons with properties when entering into an IVA. Buried deep in the small print is a 4th year re-mortgage clause, which obliges debtors to release equity from their properties in the 4th year of the IVA. Since this is impossible due to their credit ratings, the IVA is rearranged over six years, with higher payments. The simple truth is that, in most cases, it would have been better to have entered into bankruptcy in the first place, as 80% of the properties never had any equity (in which case they are safe in bankruptcy).
Bankruptcy in England or Wales lasts for 12 months and in some instances can be significantly shorter. Those on pension or long term benefits are often released after just 4 – 6 months. Why, then, would anybody consciously enter into a Debt Management Plan or Individual Voluntary Arrangement unless they were persuaded otherwise? For those in everyday jobs and living in rented, bankruptcy is almost always the best solution as there is nothing to lose. And the same applies for those living in properties in negative equity.
Remember that Disposable Income is an important consideration once bankrupt. The Insolvency Service will be looking to apply an Income Payment Arrangement which will result in any disposable income being attached for 3 years after the date of the bankruptcy order. We have access to all of the latest allowances and in 75% of cases we avoid this from ever happening. And in those cases where it can’t be avoided, we will limit the damage.
Here is a summary of the key points of bankruptcy:
- It is a civil process and is handled in much the same as a rent dispute or a divorce
- At no stage of the process does a court official or bailiff visit your home
- You will not lose any household furniture or personal items (laptops, TVs are safe)
- You no longer have to appear in court.
- Your name no longer appears in local newspapers
- The Courts treat you fairly and have no interest in making money out of you
- You are allowed to keep vehicles up to the value of £1,000 provided they are required for work or for seeking employment. Vehicles may also be allowed in some domestic circumstances e.g. someone who is disabled.
- You are allowed to have a bank account like everyone else
So you see, it is not that scary. We have taken something like 3,500 people out of IVAs and placed them into the protection of bankruptcy over the past 12 years and receive countless letters of undying gratitude. Give us a call if you want to chat about your circumstances.