How Bankruptcy Works?

You can file for bankruptcy on your own (debtor’s petition) or your creditors can initiate the proceedings against you (creditor’s petition).

Debtor’s petition

If you are declaring bankruptcy voluntarily you would need to complete a Debtor’s Petition form. You can get the form from your local county court, provided it deals in bankruptcy orders. Next, you need to submit the form to the court along with £150 for the court fees and any administration fees the court charges. You would be assigned a licensed Official Receiver who would study your finances and assess the value of your possessions and property, if you own any.

Once the assessment is complete, your assets would be seized and sold to help pay your creditor debts. Based on your current income, you may be ordered to pay an affordable amount to the Official Receiver who would then distribute it amongst the creditors. You would also be required to pay the fees for the Official Receiver, which is usually £360.

Creditor’s petition

In case of constant default on payments, your creditors can file a bankruptcy petition against you, based on which the court can declare you bankrupt. The rest of the procedure remains the same as in case of filing a debtor’s petition, with the only difference that the associated fees may be waived in some circumstances. After a period of one year, you are dismissed from your bankruptcy and your creditors can no longer expect any form of payment from you.

Bankruptcy should be viewed only as your last resort because it has long lasting consequences. However hopeless your situation may seem you should first consider alternative debt solutions such as an IVA and debt management.