Is Filing For Bankruptcy The Best Option?

Bankruptcy can be seen by some as something of a minefield for anyone who is not working in the debt and insolvency field. It's clearly very important that anyone seeking an application for declaring bankruptcy in the UK needs to find the very best professional bankruptcy advice so they can have their personal circumstances assessed and decide on what are the best options.

Although each case where someone may be declaring bankruptcy can be quite different, there are a few simple guidelines to follow in all instances for you to be successful when declaring bankruptcy.

This is beyond the scope of simply paying for credit card or utility bills (although these will be taken into account), as the ultimate test to check whether you qualify is based upon your income and assets versus your total outgoings, and your ability to meet all your responsibilities on a long term basis.

Types of Bankruptcy

In simple terms, if you don't have any available income to repay your debt of at least £750 to any of your current creditors, then declaring bankruptcy may be one option you should consider, particularly if your total assets (for example, home, car, savings) have much less value than the debt that's owed. In this particular case, there are 2 potential ways for you to be declared bankrupt; involuntarily and voluntarily.

Whilst the titles of each bankruptcy type should be fairly self-explanatory, a brief description follows:

Voluntarily Bankruptcy

This is when an individual decides that they can no longer manage their own debts.

Involuntarily Bankruptcy

This is when creditor's file for bankruptcy against individuals for failing to repay their loan agreement, e.g. credit cards, purchase hire. A statutory demand needs to be issued before a bankruptcy petition is filed against you.

Statutory Demands Explained

This demand is effectively a payment request giving you 21 days to settle the debt, or 18 days to supply evidence and request the court dismisses your claim.

If you fail to respond to this demand it may ultimately result in a bankruptcy order being made against you; if you're debts are have been accumulated under your company, an equivalent is for a winding up order to be issued. In both cases, assistance with any required paperwork can be provided by using an appointed insolvency practitioner and court dates will be provided by an official receiver.

What Paperwork Is Needed?

For voluntary bankruptcy, a debtor's petition is required first by the Court; this is where a request is made so the court declares you bankrupt, under the outlined reasons. The required forms are : the Insolvency Rules 1986 form 6.27, Insolvency Rules 1986 form 6.28, the statement of affairs (complete list of individual creditors), a Statement of Truth (confirming the accuracy of the information you have provided).

What Are The Costs Involved

Whether you are declaring bankruptcy voluntarily or involuntarily, the cost is currently (2013):

For England and Wales:

Court fees: £175

Official receiver's fee: £525

Total: £700

For Northern Ireland:

Court fees: £115

Official receiver's fee: £345

Solicitor's fee: £7

Total: £467

Bankruptcy Alternatives

Although this outlines some of the key steps in the bankruptcy process, insolvency can be sometimes a long, complex and uncertain procedure. So it's important you seek professional, independent advice before proceeding.

There are of course alternatives, like an individual voluntary arrangement. If you need any more information on either declaring bankruptcy of iva advice, please contact us.