Bankruptcy Solicitors
Bankruptcy is not the end — it is a defined legal process with a defined exit. Understanding what it means for your assets, your income, and your credit is what makes the difference between a decision made in panic and one made in knowledge.
Bankruptcy under the Insolvency Act 1986 can be initiated by you (a debtor's petition) or by a creditor (a creditor's petition). Discharge is automatic after 12 months — at which point most unsecured debts are written off. But the bankruptcy has significant consequences before that point: a trustee in bankruptcy takes control of your assets, can realise equity in property, and can pursue an income payments agreement where you have surplus income. A solicitor will advise on what bankruptcy means for your specific position — and whether it is more or less appropriate than the alternatives.
Bankruptcy — The Process and Its Consequences
Bankruptcy — how it works, what it does to assets and income, and what happens after discharge.
Bankruptcy has significant consequences — but they are defined, time-limited, and understood. A solicitor will explain exactly what bankruptcy means for your specific position before you decide whether to petition or how to respond to a creditor's petition.
Applying for your own bankruptcy — the debtor's petition
An individual who cannot pay their debts can apply for their own bankruptcy online via the Insolvency Service. The application fee (currently £680) must be paid before the application is submitted. Once the bankruptcy order is made, the official receiver takes control of the estate — assessing assets and income, realising realisable assets, and determining whether an income payments agreement or order is appropriate. Bankruptcy is appropriate where: there are no significant realisable assets (particularly no property equity); the total debt is too high for an IVA to be a realistic option; or where immediate debt relief is more important than credit implications. A solicitor will advise on whether bankruptcy or another solution is more appropriate.
Defending a creditor's bankruptcy petition
A creditor owed more than £5,000 can present a bankruptcy petition against an individual who has not paid following a statutory demand or a judgment debt. The petition must be served personally, and the debtor has the opportunity to oppose it at the hearing. A bankruptcy order can be opposed where: the debt is disputed (there is a genuine and substantial dispute about whether it is owed); the petition is an abuse of process (the debt is being used as a debt collection tool rather than a genuine insolvency trigger); or where an IVA proposal has been filed and is pending a creditors' vote. A solicitor will advise on the grounds for opposition and represent you at the petition hearing.
Property and equity in bankruptcy
A property owned (or co-owned) by the bankrupt vests in the trustee in bankruptcy on the making of the bankruptcy order. The trustee's interest in the equity must be realised — either by sale of the property, purchase of the trustee's interest by the bankrupt or a third party, or by a charging order on the property. Where the property is the family home with a partner or dependants in occupation, the court will not ordinarily order sale within the first 12 months. After 12 months, the creditors' interests take precedence and sale can be ordered. A solicitor will advise on the options for protecting or preserving the family home — including purchasing the trustee's interest before it is realised by sale.
Income payments — the income payments agreement and order
Where the bankrupt has surplus income (income above what is needed for reasonable domestic needs), the official receiver or trustee can pursue an income payments agreement — a voluntary agreement for the bankrupt to pay a proportion of the surplus income into the estate for 3 years. Where no agreement is reached, an income payments order can be made by the court. An income payments order can run for up to 3 years — meaning that it may extend beyond the 12-month discharge date, and the bankrupt continues to make payments even after they are technically discharged. A solicitor will advise on the income payments assessment, negotiate the appropriate surplus level, and challenge an assessment that overstates the available surplus.
Discharge — automatic after 12 months
A bankrupt is automatically discharged 12 months after the bankruptcy order is made — unless the official receiver applies to suspend discharge (where the bankrupt has not cooperated with the process). On discharge, most unsecured debts are written off — the bankrupt is released from the liability. The bankruptcy is not removed from the Insolvency Register on discharge, but is marked "discharged." It remains on the credit file for 6 years from the date of the bankruptcy order. Certain debts are not released on discharge — including student loans, child support, fines, and debts arising from fraud. A solicitor will advise on which debts are discharged and which remain.
Bankruptcy restrictions — during and after the order
During the period of bankruptcy (until discharge), the bankrupt is subject to a number of restrictions: they cannot act as a company director; they cannot borrow more than £500 without disclosing the bankruptcy; they cannot carry on business under a different name. Certain professions — solicitors, accountants, financial advisers, MPs — are incompatible with bankruptcy. A Bankruptcy Restrictions Order (BRO) can extend restrictions for between 2 and 15 years where the bankrupt has engaged in dishonest or culpable conduct. A solicitor will advise on the restrictions applicable to your specific situation and on opposing a Bankruptcy Restrictions Order where one is sought.