Applying for Bankruptcy

The soaring cost of living has resulted in more people turning to loans and credit cards just to survive. Unfortunately many are beginning to struggle to repay their debts and as a result are finding themselves insolvent (where income is not enough to repay debts after essential living expenses or vice versa). One possible solution, and often the only option that many people are aware of, is bankruptcy. This is where an individual’s assets may be used to repay some or all of the outstanding debt.

Petitioning for bankruptcy

The first step in declaring bankruptcy is the initial petition. This may be submitted to the court by the creditors, or if it is the right option, the debtor. In both instances, the debt must exceed £750 and be unsecured.

Paperwork

Where the individual is petitioning for themselves, there are 2 documents that need to be completed; the Debtors Bankruptcy Petition; and the Statement of Affairs. Both of these can be found on the Insolvency Service's website. It is advisable to seek help completing these forms.

Fees

The total fee associated with declaring bankruptcy is £700. This is made up of a charge of £525 to cover the cost of managing the bankruptcy, and £175 to cover the court costs. Those on Income Support may not be required to pay the court costs, however the court will not consider the bankruptcy petition if all required fees are not paid. Should the court reject the Bankruptcy application, these fees are generally not refunded.

Bankruptcy Court

It is important to be aware that not all courts provide a Bankruptcy service, so the individual will need to find the nearest court in their area to submit their paperwork and fees. They will need to contact the court to arrange a suitable time and date for the hearing. Only the court can decide if Bankruptcy is appropriate. They will either issue the bankruptcy order, reject the petition and possibly order an alternative (such as an Individual Voluntary Agreement or IVA), or delay the order pending further investigation.

For anyone who is considering bankruptcy, it is vital that they seek advice from a licensed money advisor or Insolvency Practitioner (IP) as there may be a more suitable alternative available. There are also a number of non fee charging services that can help, such as the Citizens Advice Bureau (CAB), the National Debtline, or the Consumer Credit Counselling Service (CCCS). It is also possible to have a third party petition for bankruptcy on your behalf and may be advisable.

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