How to Go Bankrupt
If you want to find out more about how to go Bankrupt, then read this article detailing a more in-depth view on Bankruptcy. This article is written in a simple format with the key steps in going bankrupt in England and Wales explained with links to sources of additional and more detailed information, provided for those who wish to look into the matter more deeply. The procedures and rules are a little different in Northern Ireland and the main differences are summarized below. The process in Scotland is called Sequestration which is markedly different from the processes in the rest of the UK. The best source for additional and detailed information relating to England and Wales is the website of The Insolvency Service in the UK www.bis.gov.uk/insolvency and for Northern Ireland the website of The Insolvency Service is www.detini.gov.uk
The first step is to get advice. You may require or need independent legal or financial advice. That means that you may need to consult a solicitor and/or an authorized insolvency practitioner and/or a reputable financial advisor. There are a number of organizations and many private sector companies which offer free initial advice (including ourselves), although some private sector companies may charge a fee even for initial preliminary advice, which you should generally avoid.
The second step is to consider the alternatives to bankruptcy. To go bankrupt you have to be insolvent. If you don’t know the meaning of insolvency, you need to find out. You may discover that you are not in fact insolvent and that bankruptcy is therefore not a possible solution for you. Some of the most common alternatives to bankruptcy are summarized below and one of them may be a better solution for you, whether or not you are insolvent. They are:
To reach an informal compromise arrangement with your creditors repaying your debts to an agreed timetable; this is often described as Debt Management;
To enter into an Individual Voluntary Arrangement (IVA) with your creditors; this solution also requires that you are insolvent;
To have the court make an Administration Order against you if one of your creditors has a court judgment against you and provided your total debts are less than £5,000;
To obtain a Debt Relief Order (DRO) provided your debts are less than £15,000 and provided you have a low level of disposable income and a low level of assets.
To learn more about these solutions you can contact us at National Debt Relief or browse our website.
The third step is to obtain and complete the two relevant forms which you can print off from www.bis.gov.uk/insolvency The first form is the petition (Insolvency Rules 1986 form 6.27) on which you state your request to the court for you to be made bankrupt and the reasons for your request. The second form is your statement of affairs (Insolvency Rules 1986 form 6.28) on which you show all your assets and all your debts including the names and addresses of your creditors and the amount you owe to each. You must also complete a Statement of Truth on this form.
In Northern Ireland the petition form no is Insolvency Rules (NI) 1991 Form 6.30 and your statement of affairs form number is Insolvency Rules (NI) 1991 Form 6.31 which must be sworn in front of a solicitor. A Statement of Truth is not required in Northern Ireland.
You complete these forms in capital letters using black ink. You will need to take two extra copies of these forms if you intend to process your petition through a county court. We offer a bankruptcy form completion service from £300 plus VAT. You can contact us for further details should you require this service.
The fourth step is to bring the completed forms to court together with the relevant fees, which you need to be able to pay upfront. The deposit of £525 goes towards the costs of administering your bankruptcy and is payable in all cases. The court fee of £175 may be waived by the court in some cases if for example you are on income support. Court staff can advise you on this matter. In Northern Ireland the court fee is £115 but you may incur an additional fee of about £10 if your solicitor charges you for the process of swearing the statement of affairs.
If you do not have the correct amounts to pay the court fees your petition cannot be processed. Fees can be paid in cash, via postal orders or by a cheque from a building society, a bank or a solicitor. Personal cheques are not acceptable. The rules, forms and fees will vary if both parties in a marriage or partnership are petitioning for bankruptcy. See www.bis.gov.uk/insolvency for the relevant information in these instances.
The fifth step is to determine which court to go to. Generally you go to the court which deals with the area where you have lived or traded for the longest period in the previous six months. If you live in one court district and trade in another, you should go to the court dealing with the district where you trade. You should go to a civil court or a county court and not to a magistrate’s court. You can contact the court by phone between 10.00 a.m. and 4.00 p.m. Monday to Friday to confirm that it has jurisdiction to hear a bankruptcy case. An exception to the above is if you live or trade within the London Insolvency District. If your unsecured debts are less than £100,000 you must present your bankruptcy petition at the Central London County Court; if they are £100,000 or more you must present your bankruptcy petition at the High Court. In Northern Ireland the relevant court is the High Court of Justice in Northern Ireland Chancery Division (Bankruptcy).
After you go to court your petition may be heard right away or a time will be arranged for the court to consider it.
The sixth step depends on the court hearing and what is decided at it. There are five possible outcomes. Firstly, the court proceedings may be stayed (i.e. delayed) if for example the court needs further information before it can decide whether to make a bankruptcy order or not. Secondly, the court may dismiss the petition if for example an administration order would be more appropriate. Thirdly, the court may make an order referring you to an approved intermediary if it believes that a DRO may be appropriate. Fourthly, the court may appoint an insolvency practitioner if it considers that an IVA would be appropriate. This course of action requires that your assets exceed £4,000, your debts are less than £40,000, you have not been made bankrupt or entered an IVA in the previous five years and you do not object to entering an IVA. If you do, you should inform the court. Fifthly, the court may make a bankruptcy order as you have requested, thus making you bankrupt immediately. See the downloadable publication Guide to Bankruptcy on www.bis.gov.uk/insolvency for details on the effects of the bankruptcy order on you and the restrictions it places on you.
In our next article entitled What Happens after My Bankruptcy Order, we will look at the sequence of events that takes place immediately after you go bankrupt.
Written by Paddy Byrne
25 / 09 / 2012