personal insolvency advice

Personal Insolvency

If you are considering applying for personal insolvency then you really need to consider all of the elements involved so that you can make an informed decision on how best to get rid of your debt problems.

For an increasing number of people with major debt problems a personal insolvency or bankruptcy is becoming the method “of choice” to completely remove their entire personal unsecured debt burden. However there are people who receive little or no support before making the ultimate decision to go bankrupt.

Before you make any such insolvency decisions please read the information within the Personal Insolvency website. If you would like more information on the many alternative insolvency solutions then please do not hesitate to e mail us or ring for further clarification on a completely impartial and unbiased basis.

What is Personal Insolvency?
Personal Insolvency Legislation
Benefits of Insolvency via bankruptcy
Disadvantages of Insolvency

What exactly is Personal Insolvency or Bankruptcy?

Personal Insolvency is an umbrella term which covers both personal Bankruptcy and other insolvency restructures, such as Individual Voluntary Arrangements (IVA). Bankruptcy is the legal means by which a consumer or Sole Trader/informal partnership business, with irrecoverable debt problems, asks the County Court to provide protection from creditors while the debtor’s financial affairs are sorted out.

Likewise any creditor who is owed more than £750 (in England and Wales) can ask the same Court to declare a debtor bankrupt and then recover any available assets to pay off such debts. Personal bankruptcy is designed to provide a debtor with a fresh start to his/her financial life by wiping the slate clean. However, there are a number of issues which all debtors need to be aware of before any such drastic steps are taken.

Personal Insolvency Legislation

The current legislation on bankruptcy is found in The Enterprise Act 2002; the provisions relating to personal bankruptcy being finally brought into law from 1st April 2004. The rest of Personal Insolvency legislation remains in The Insolvency Act 1986.

The main bankruptcy provisions of The Enterprise Act are:-

  • All first time, non fault, personal bankruptcies shall now only last for a maximum of 12 months before formal discharge.
  • The debtor may additionally be issued with an Income Payments Order (IPO) asking them to make monthly payments to the Official Receiver, to help discharge the debts, for up to 3 years.
  • In exceptional cases the debtor may be issued with a Bankruptcy Restriction Order (BRO) which limits his/her ability to obtain further credit if the debtor has been reckless in previous borrowing. A BRO can last for up to 15 years and more than 1000 of these Orders were issued during 2006.
  • The Official Receiver (appointed by the Court to administer the bankruptcy) has up to 3 years in which to dispose of any of the debtors major assets (usually the debtors home) to help repay creditors. It is also worth noting that under the bankruptcy rules the Official Receiver is duty bound to find any alternative means to extract the equity from a property rather than simply sell it. For instance it may be possible for the debtor to re mortgage the property or a third party may be able to buy out the debtors share of any equity.

The Advantages of Personal Insolvency via Bankruptcy

  • You will immediately become protected by the Court from all your creditors’ debt recovery actions. You can automatically stop paying any of your unsecured creditors and refer them directly to the Court to register their claims.
  • The Court appoints someone, either the Official Receiver or a nominee, to “step into your shoes” and deal with all your financial affairs on your behalf.
  • Once your bankruptcy is officially discharged most of your debts will be written off and you can start afresh.

The Disadvantages of Personal Insolvency via Bankruptcy

  • Bankruptcy Orders are still announced in a local newspaper where you have been resident for the preceding six months.
  • An Income Payments Order may be issued against you that could extend your repayments in bankruptcy for up to 3 years.
  • A Bankruptcy Court Order legally overrides any attempts to give away interests in property to third parties unless a fair market value is paid (you cannot simply transfer the marital home across to your wife in contemplation of applying for bankruptcy at a future date unless the transfer took place a minimum of 2 years prior to your application for bankruptcy).
  • An entitlement to any future assets could be caught within the terms of a bankruptcy – bequests in wills or an increase in future earning capacity could potentially be forfeited for the benefit of your creditors if these assets came to you during the period of your bankruptcy.
  • All bankruptcy proceedings carry an upfront fee to pay for the actual bankruptcy application. The fee varies depending upon an individual circumstance but is a maximum of £460 per person from June 2006.
  • You may find it very difficult to obtain a bank account up to your discharge. Even if you change banks prior to your application for bankruptcy, the Official Receiver must inform all financial institutions of your bankruptcy application; it is then up to the individual bank or building society whether to continue allowing you banking facilities.
  • You will not be able to work in certain professional capacities or you will have to disclose your bankruptcy when applying for certain jobs for a period of time after the bankruptcy. Landlords cannot hold a License as a bankrupt nor can one be a company director.
  • If you are renting then your property landlord may need to be informed.

For more information on how you can avoid a personal insolvency possibly leading to bankruptcy then give us a call. We can help you gain complete freedom from debt and consolidate your debt problems. Call us on 0800 043 50 43 or complete our enquiry form and let us advise you properly.

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For free personal insolvency advice, without any obligation, complete our quick enquiry form. One of our professional advisors will contact you at a time convenient to you.

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