BankruptcyAdvice.co.uk

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2 Introduction Dealing with your debt Section I Understanding bankruptcy Section II After your bankruptcy petition Section III Bankruptcy and your home Section IV Bankruptcy and your bank account Section V Bankruptcy and your pension Section VI Bankruptcy and your motor vehicle Section VII Cancelling your bankruptcy Section VIII Alternatives to bankruptcy

3 Dealing with your debt When debts begin to spiral out of control there are a number of options available to make repayments more manageable. Each comes with its own limitations and regulations, meaning contacting a trained professional to guide you through the various processes is vital. Whatever your specific circumstances, the following will apply: Secured creditors will be unaffected by any payment arrangement or bankruptcy petition. For example, banks and building societies with a mortgage or legal charge over your home retain the right to make a repossession, if you have failed to keep up with payments. Any action taken to consolidate or alter repayments is likely to affect your credit rating, will be passed to credit agencies, and appears on your credit record. In some circumstances, using any of the options available to help with creditors and debt problems can impact on your employment, particularly but not exclusively those working in financial services, and limited company directors. Unsecured debts, such as credit cards, bank loans, store cards or overdraft facilities, afford the lender the right to take possessions to the value of the amount outstanding, when repayments are not made. This can include applications to seize property, court judgements and charging orders to secure the debt against your home. Charities can offer some help towards bad debt problems in rare circumstances. If you are worried about debt management, need detailed advice on your situation, or want a list of recommended agencies and charities, then contact The Bankruptcy Advice Service, on

4 I- Understanding bankruptcy What is bankruptcy? Bankruptcy is an official declaration that you can no longer afford repayments, need to share any remaining assets across your creditors, and need a fresh start financially, subject to specific restrictions. Why should I declare bankruptcy? There are various reasons why people declare bankruptcy, but in no way should this ever be seen as an easy route out of debt. The process is complex, takes time, and severely affects your ongoing ability to obtain credit, including mortgages, business loans, and credit cards. Bankruptcy transfers the management of your professional or personal funds to an Official Receiver or trustee for the foreseeable future. To qualify, the total value of assets- i.e. a car, savings and property - needs to be less than the total amount owed to creditors, with debts amounting to 750 or more, to one or more individuals or organisations. Only if this applies will your circumstances be considered. For a list of alternatives to bankruptcy please refer to Section VIII of this guide; Alternatives to bankruptcy, or contact The Bankruptcy Advice Service on How can I be declared bankrupt? Either submit a debtor s petition to court, declaring yourself bankrupt, or if one or more creditors are owed 750 or more by you, unsecured, they can submit a creditor s petition to bankrupt you. If someone else makes you bankrupt, a preliminary questionnaire will be sent to you prior to any further action. What is a statutory demand? A statutory demand is a request for payment from a creditor, giving you 21 days to settle the debt, or 18 days to ask the court to dismiss the demand (for which evidence will be required). If you fail to do this and the debt exceeds 750: A bankruptcy order can be brought against you after 21 days. A winding up order can be brought against you after 21 days.

5 How much does bankruptcy cost? It s important to realise that, despite helping people escape debt, bankruptcy is not free. Currently in England and Wales you must pay 175 as a court fee, and a further 525 as an Official Receiver s fee. In Northern Ireland the court fee is 115, the Official Receiver s fee is 345, and an additional 7 is charged for solicitor s costs. Individuals who are either on a low income, redundant, or in receipt of particular benefits may be entitled to a reduction to these fees, or for the court costs to be waived outright. The Official Receiver s fee will always have to be paid by the person claiming bankruptcy irrespective of extraneous circumstances, and all costs are nonrefundable, regardless of your petition being accepted. Who is the Official Receiver? Appointed by the Secretary of State, an Official Receiver administers your bankruptcy, protects assets following the bankruptcy order, and acts as a trustee to your estate when there is no insolvency practitioner. They will deal with all notices to courts, sheriffs, bailiffs, Her Majesty s Revenue and Customs (HMRC), and any other relevant bodies. Who is the insolvency practitioner? The insolvency practitioner, when appointed, must be authorised by the Department for Business Innovation and Skills, or appropriate body, and can act as trustee - responsible for selling or distributing assets and making payments to creditors on your behalf. How do I petition for my bankruptcy? Once you are clear on your eligibility for bankruptcy, and have considered all other options available to you, the next step is to submit two forms. These can be downloaded from The Insolvency Service website, and consist of: The petition (Insolvency Rules 1986 form 6.27) - this form acts as a request to the court for you to be declared bankrupt, and should specify the circumstances and reasons leading up to this decision. The statement of affairs (Insolvency Rules 1986 form 6.28) - this document details all your debts, how much is owed to each individual creditor, their names and addresses, along with a Statement of Truth that needs to be completed. Both forms can be downloaded via the following link, and come with an example to help complete 6.27, along with Guidance Notes for 6.28: If you are unsure about the requirements of either form, please contact The Bankruptcy Advice Service on

6 Once you have completed the petition and statement, if you are filing with a County Court, officers will need two copies of each form before accepting the documents. High Courts do not need the additional copies. All fees are payable upon submission, and you will not appear in court until the costs have been met to action the petition. What are the repercussions of bankruptcy? The impact of bankruptcy is far reaching. Please refer to Sections III- VI of this Guide, where you will find information on how this will affect your home, bank account, and motor vehicle. Your job may be affected by bankruptcy, particularly if you work in the financial services. You will also not be able to manage or act as director of a limited company. In any event, the Official Receiver must advertise the bankruptcy in an official publication (usually a newspaper), and has the discretion to repeat this in any other way they deem appropriate. You have the right to apply to the court to stop this from happening. All information relating to your bankruptcy will be held in the public realm via the Individual Insolvency Register, which can be viewed by anyone online, or by visiting the Official Receiver s office. Details of property in bankruptcy will also be shared with the HM Land Registry, for up to five years after bankruptcy. Credit reference agencies will obtain information on your bankruptcy from other sources, not the Official Receiver. These can include the Individual Insolvency Register, newspapers and other official publications, and the Register of County Court Judgements. What does the Individual Insolvency Register do? In addition to current bankruptcy orders and those ended in the last three months, the Individual Insolvency Register keeps up to date records on the following: Current Individual Voluntary Arrangements. Current Fast Track Voluntary Arrangements. Current Debt Relief Orders and those ended in the last three months, current Debt Relief Restriction Orders and Debt Relief Restriction Undertakings. This information can include the name of the bankrupt party or debtor (including previous), occupation and/or trading details, date of birth, last known address, gender, details of order or agreement, and discharge date. We recommend contacting The Bankruptcy Advice Service on for comprehensive information if you are concerned.

7 What are my responsibilities if I am made bankrupt? You must: Adhere to the requirements as laid out by the courts, provide all requested information to the Official Receiver, including attending all interviews, and be forthcoming about all investments, assets and debts. Hand over all books, records, policies, bank statements and similar documents relating to your finances and assets. Make no payments to creditors for debts owed prior to the bankruptcy order, as these will be covered within the estate. Be forthcoming about any wage or property value increases during your bankruptcy. A court appearance may be required to explain your situation, and failure to comply can result in your arrest. When will my bankruptcy end? Discharge from bankruptcy is a process that lifts the restrictions placed upon you by bankruptcy proceedings and releases the bankrupt from much of the debt owed when the order was made. This normally happens after 12 months, irrespective of whether payments have been made to creditors, or contributions are still being made. However, it is important to understand that the Official Receiver can apply for a Bankruptcy Restrictions Order, meaning you will still be subject to financial limitations up until an agreed date. As such, discharge does not mean a return to normality in terms of your access to credit, and repayments may also still be required. The 12-month time frame can be altered if: The Official Receiver has finished investigations and enquiries, and files a notice of early discharge- you will be informed of this. You fail to co-operate with the requirements of your bankruptcy order, in which case discharge can be delayed- this includes failing to provide information when requested. Do I need to do anything to be discharged? In normal circumstances a discharge is automatic, and no action is required on your part. It is possible, but not necessary, to obtain a Discharge Certificate, at a cost of 70 ( 5 for copies) through your local court, by issuing a written request no later than two weeks prior to your discharge date, or the court can issue a letter to the same effect for free.

8 Do I need to do anything to be discharged early? It s highly unlikely you will be considered eligible for early discharge if you do not answer requests from the Official Receiver in full, and as quickly as possible. Three months after the initial report is sent to your creditors (within eight weeks of the bankruptcy order), your file will be reviewed, and early discharge may be implemented. However, this is subject to approval from all your creditors and the trustee, who all have 28 days to file an objection with the Official Receiver. In any instance, it is irregular for early discharge to take place sooner than six months after the bankruptcy order. What happens after I am discharged? Upon discharge you will be released from most debts involved in the bankruptcy order, except: Owings relating to family court proceedings, including CSA contributions, maintenance payments, and personal injury claims. Court fines, fees and debts relating to fraud or other crimes. Debts incurred after the bankruptcy order was made. Student loans. What about my mortgage and other assets? Your lender will still be entitled to recover what is owed to them in the event of payments being missed. If no action is taken against the property within three years the beneficial interest may be returned to you- see Section III of this guide; Bankruptcy and your home. Any assets seized in the bankruptcy order still held by the Official Receiver or trustee will not be returned on discharge, and can still be sold in due course. What about my business? Once you are discharged changes to the restrictions will be implemented on your behalf, which can include: The rights to trade without a Bankruptcy Restrictions Order in place. The right to act as director of a limited company, and be involved in the management therein. However, in the event of a separate Disqualification Order or Bankruptcy Restrictions Order, this may not be possible. In all instances, we recommend contacting The Bankruptcy Advice Service on

9 II- After your bankruptcy petition When you have been made bankrupt several steps will then be taken to begin organising and distributing any remaining assets to pay off the outstanding debts. This is a long and complicated process- please refer to Sections III-VI of this guide for details on the action that can be taken against property, pensions, bank accounts, and motor vehicles, along with how bankruptcy can affect your job. Official Receiver interviews The Official Receiver or a member of their staff will contact you immediately, usually to arrange an interview at their office. A telephone interview may be possible if: You file to bankrupt yourself. You have not traded in recent months. You have never been bankrupt before. You have a telephone number. For both telephone and office interviews you must ensure all financial documents relating to the bankruptcy, and any questionnaire you have filled out (where applicable) are on hand. Interviews can last between two and three hours. In some cases, you may be required to attend or take part in a second interview. Following your interview, if all the information has been provided, a report will be issued to your creditors within 8-12 weeks, detailing assets and debts. If you are concerned about this process, or require additional information, please contact The Bankruptcy Advice Service on What are Income Payment Orders and Income Payment Agreements? An Income Payment Order (IPO) or Income Payment Agreement (IPA) can be issued when your payments to creditors have been reduced following a bankruptcy order. In cases where the bankrupt has surplus income as a result of this, the trustee or official receiver will arrange for ongoing contributions to creditors to be made when you can afford. This process normally lasts three years from the date of the bankruptcy order, but this can differ from case to case. IPAs The Official Receiver or trustee is entitled to ask you for regular payments from surplus income towards the bankruptcy estate, for a specific amount of time. This cannot leave you unable to meet everyday living costs, and is a voluntary agreement, but binding; non-compliance can result in court orders and suspension of bankruptcy discharge.

10 IPOs In cases where no agreement can be settled on an IPA, an IPO is necessary. This is a court order obtained by the trustee, and can either require payments directly from you or your employer to creditors. Failure to meet the requirements therein will result in the suspension of bankruptcy discharge and additional legal action. What are deemed everyday living costs? An IPA or IPO cannot leave you incapable of covering domestic costs for you and any dependents- including children and adults without an income. As every case is unique, the trustee or court assesses the reasonable needs of a household on an individual basis. These include: Household insurance Car tax, breakdown coverage and insurance (if the car is exempt- see Section VI of this guide; Bankruptcy and your car) Membership to professional bodies essential to your income Medical costs including dental and optical Mobile phone (to a reasonable monthly tariff) Dry cleaning TV licence and rental (including videos) Reasonable expenses can differ, and the Official Receiver will take into account personal circumstances when making any judgement. How do I prove my reasonable costs? You will be asked for: A statement of affairs detailing income and expenditure if you filed for bankruptcy, including pay slips, invoices and bills or... Your preliminary information questionnaire (PIQB) if someone else made you bankrupt. Both should contain comprehensive information on rent, food, heating, lighting, clothing and other normal monthly outgoings. In most cases, any disposable income will be tied up in an IPA or IPO following bankruptcy. Within income, all payments you receive from self and PAYE employment, salary, benefits (including those for children), working tax credits, and pension payments will be included. What if my income increases or I receive a lump sum? In both instances you must contact the trustee immediately. For wage increases a form may be required to detail the new salary and current spending, and any IPA or IPO may be amended as a result.

11 In the event of a lump sum, it s likely you will be required to make a one off payment as a result, which will vary depending on what point you are up to in any arrangement, and whether you have been discharged from bankruptcy. Will I still have to pay tax? In most cases HMRC will apply a nil tax code, meaning your employer will be instructed not to take any more income tax from you. They will not be informed of the reason behind this, and this does not mean you are exempt from tax- this will be payable later. Surplus money resulting from this can form part of an IPA or IPO. What is a Bankruptcy Restriction Order? When an Official Receiver believes you have acted dishonestly or you are to blame in some way for the situation this will be documented in a report to the court. It will then be judged whether this evidence, and any other, is worthy of a Bankruptcy Restriction Order being issued. You will be notified of an intention to apply for a BRO, if this happens, within six months of the bankruptcy order, and in all instances you have 21 days to respond to the allegations therein. In the event of a BRO being issued, restrictions can last between two and 15 years, depending on the circumstances. The more your conduct is deemed to be unacceptable, the longer the order will last. The reasons for a BRO being issued include gambling, unreasonable extravagance, sale of assets below market value, bias creditor repayments, fraud, and incurring debts with no reasonable chance of settling the balance. Again, this is dependent on individual circumstances, so every case is different. In most instances, the Official Receiver must apply for a BRO within 12 months of bankruptcy, but permission can be given for an extension to this, including after a suspension of discharge. An interim order can be issued, which if approved places restrictions on the bankrupt until the date of the full BRO hearing. It is also possible to enter into a Bankruptcy Restriction Undertaking, via an agreement with the Official Receiver. This does not involve going to court, and is usually for a shorter period of time, but can constitute exactly the same limitations as a BRO.

12 How restricted will I be? You must: Disclose bankruptcy status when trying to gain credit of 500 or more. When trading as a business under a different name to the bankruptcy, inform all those you wish to do business with of the bankruptcy. Not act as a limited company director, or take part in the promotion and management therein without express permission from the court. Not act as insolvency practitioner, receiver or manager of any company property on behalf of debenture holders. Not act as a Member of Parliament in England or Wales. Breaching these restrictions is a criminal offence, and may result in prosecution including fine or imprisonment. If you take part in a company s management, you take liability for all debts that arise during your bankruptcy. Many more restrictions apply, as have been set out in the insolvency law and in your personal Bankruptcy Restriction Order or Undertaking. As such we recommend contacting The Bankruptcy Advice Service on to discuss the full regulations. Once a BRO or BRU is made a notification will be sent to the Individual Insolvency Register, and may also be issued via a press release to identify you, the restrictions and the conduct deemed inappropriate. What if my bankruptcy is annulled after the BRO or BRU? If your bankruptcy is annulled (see Section VII of this guide; Cancelling your bankruptcy) because it is illegitimate, then all restrictions will be wiped from the record, and any public register. If the bankruptcy is annulled because all debts are settled, restrictions still apply.

13 III- Bankruptcy and your home What will happen to my home after a successful bankruptcy petition? In some, but not all bankruptcies, the Official Receiver or trustee may be forced to sell your home to help clear related debts. This can apply to properties under freehold, leasehold, or shared ownership. If the address is mortgaged and repayments are not met, the lender can apply to sell your home to recoup the outstanding money. We recommend contacting The Debt Advice Service on , and your mortgage lender to discuss how bankruptcy will affect your individual situation. Why would my house be sold? A property will be sold in order to release the value of your beneficial interest therein. This is calculated as follows: On a property under single ownership the beneficial interest amounts to 100% of the value at sale. In shared ownership, this would usually be split equally amongst all parties, therefore where two people own a home each would be entitled to 50% of the sale as beneficial interest. Any amounts owed on a mortgage or loan secured against the property will be settled as a priority after the sale of the home. Beneficial interest is therefore calculated once these amounts have been deducted. When you are made bankrupt your beneficial interest is transferred to the Official Receiver or trustee. If you are the sole owner it is highly likely the same will happen with the legal title to the home. However, in a shared property the legal title will remain split between you and the other parties, but action can still be taken against the property. If you have access to other funds that can meet the amount owed to creditors then it may not be necessary to sell your home. When the property is shared with othersfor example children or spouse- then the sale can be delayed by up to 12 months, allowing time to find other accommodation. After this time if there is still a requirement to sell then it is highly unlikely the court will refuse this order, unless your interest in the property amounts to less than 1,000. Can I stop the sale of my home? It can be possible for a friend or relative to buy you out of the property, therefore freeing up your interest share to be distributed amongst creditors.

14 Bankruptcy Restriction Notices In the event of action being taken against your home, once you have been made bankrupt a Bankruptcy Restriction Notice will be entered at The Land Registry. This declares that you are no longer the legal owner of the property, have no entitlement to sell, and will have no further dealings with the address in question. This restriction will stay in place until the trustee has been paid for beneficial interest in the property, unless nobody buys the home and your interest is returned to you. Form J restrictions A trustee can apply for a Form J restriction at The Land Registry by providing a record of their beneficial interest in the property. Once this is accepted the trustee must be notified of any dealings in connection with the address. A Form J restriction can only be removed when the trustee has received their beneficial interest in the property. If the address is co-owned, then the beneficial interest is not automatically transferred to the trustee- this will be done after sale by the bankrupt individual and third parties. Valuing a trustee s claim in your property The value of a trustee s claim via a Form J restriction is equal to their beneficial interest in the property- taking into account co-owners, how much is owed to them, and any outstanding amounts you have already secured against the address. The trustee is also entitled to claim for additional interest, meaning if the value of your beneficial interest is more than the costs, fees, and debts of your bankruptcy, the trustee may still receive the full amount of beneficial interest you have. If the value of beneficial interest is less than the costs, fees and debts, the trustee will be paid the beneficial interest only, allowing the Form J restriction to be lifted. What if someone wants to buy my beneficial interest after bankruptcy and I own the property outright? So long as your beneficial interest amounts to more than 1000 it is possible for a friend or relative to buy the trustee s beneficial interest. Any interested parties should contact the Official Receiver for specific information. The Official Receiver s costs are approximately 500, payable by the purchaser, who may be liable for Stamp Duty Land Tax.

15 What if someone wants to buy my beneficial interest after bankruptcy and I co-own the property? If the property is co-owned, meaning the legal title and beneficial interest stay with the owning parties after bankruptcy, then it is possible to sell a property to friends and relations. Any interested parties should contact the insolvency practitioner or Official Receiver to discuss buying the beneficial interest When the beneficial interest is more than 1000 you may be eligible for a property conveyancing scheme. This is run by The Insolvency Service and solicitors, and can allow for beneficial interest to be transferred back to you, a friend or relative, once it has been bought. However, the following charges and fees will apply, in addition to the agreed purchase price for the beneficial interest: Solicitor s fees / licensed conveyancer costs. 211 Official Receiver s costs to be paid in advance- any monies not used up during the transaction will be refunded. Costs for independent valuation of the property, unless this has taken place recently. Comprehensive and up to date, written details of any amount needed to pay off the mortgage and other charges associated with the property will be required from the beneficial interest buyer. If they cannot afford to match the current repayments, it is still possible for them to be involved at a later date- contact the Official Receiver for more details. However, if the time lapse has led to any increase in property value, the purchase price for beneficial interest is likely to have increased too. What if I rent my home? If you rent your home then bankruptcy may affect your tenancy, especially if you fall behind on rental payments. In most circumstances the Official Receiver or trustee will not take action against the property to raise funds for creditors, but it is highly likely they will contact the owner to inform them of your bankruptcy. We recommend consulting The Bankruptcy Advice Service on to discuss the implications on your tenancy.

16 What if nobody buys the beneficial interest in my home? In the event of a non-sale, the Official Receiver or trustee will retain the beneficial interest until you are discharged from bankruptcy. Again, if the value of the home increases, so too does the beneficial interest. This increase in value will go to the Official Receiver or trustee to cover your debts. However, on the third anniversary of your bankruptcy if the home has still not been sold then in most cases the beneficial interest is returned to you so long as the property is the main residence for you, your spouse (including former) or civil partner (including former). The beneficial interest will not be returned to you if: An application for sale has been made by the trustee. An application for an order of possession has been made by the trustee. Application for an order imposing a charge has been made by the trustee. A specified liability has been agreed between you and the trustee. If the trustee is unaware you have interest in a property, then they have three years from the date they become aware to deal with their beneficial interest. This means your home may still be sold. What is a Deed of Acknowledgement? After a property is sold, if there is a shortfall on the original mortgage, or any other loans secured against the home, then this will be considered a bankruptcy debt, even after you have been discharged. A lender can ask you to sign a Deed of Acknowledgement, which declares your responsibility for the debt, and shortfall resulting from the property sale. This means the creditor can chase for the outstanding amount after discharge from bankruptcy. We strongly recommend seeking legal advice, or contacting The Bankruptcy Advice Service on before making an agreement of this nature.

17 IV- Bankruptcy and your bank accounts What will happen to my bank accounts after bankruptcy? Once a bankruptcy order has been issued it s likely your accounts with banks and building societies will be frozen. In any case, it is vital that you: Stop using any chequebooks and bankcards associated with the account and hand these to the Official Receiver. Make alternative arrangements to receive funds and pay standing orders or direct debits. Banks vary on their policy towards bankruptcy, and in some instances you may be allowed to keep your existing account. Do not try to apply for a new account before the bankruptcy order is made, as this would be frozen once the order is filed, as will any funds already present in accounts that are eligible for retention. The balance of your account will be added to the bankruptcy estate. If you are in credit, then this will be considered an asset to be claimed by the Official Receiver or trustee, anything owed on the account (i.e. an overdraft) is added to the bankruptcy debts, so do not make separate payments to the lender. A request to release some funds for domestic expenses can be issued to your bank by the Official Receiver, in which case you may be allowed to keep a bankcard with an agreed balance. If the account is only used for regular, everyday living costs you will be entitled to keep the bankcard. What will happen to my joint accounts? Any joint bank accounts will also be liable for action. The Official Receiver or trustee will decide how much of the money should be released to the other party named on the account. In cases where the balance is overdrawn, the bank may ask them to repay the balance owed in full. What about my other debts to the banks? If you owed money on a loan, overdraft or credit card prior to going bankrupt, any funds held with the lender in another account will be used to help pay this off. A set off, as the process is known, is compulsory and will be implemented in all cases.

18 Will I be able to open another bank account? In most cases this will be possible, however it is entirely dependent on the bank or building society in question. You must declare your bankruptcy prior to applying for any account, and it is highly likely any approval will be subject to restrictions and conditions. If you are not eligible to keep your current account, and have difficulty applying for a new facility, it may be possible to: Open a Basic Bank Account. Apply for The Post Office Card Account if you have a benefit only income (including state pension and tax credits). Take out a prepaid debit card, allowing you to make payments, transfer cash and make ATM withdrawals up to the balance of monies already topped up on the card. It is not necessary to inform the Official Receiver of any new bank accounts opened after the date of the bankruptcy order, unless specifically instructed to do so. However, any funds that amount to more than reasonable living costs should be declared. The trustee may apply for an Income Payments Order or Income Payments Agreement, which will entitle them to contributions from your income towards the bankruptcy debt when there is surplus money available. This can last up to three years, but will never leave you without the necessary finances to meet everyday domestic needs. In any instance, we advise contacting The Bankruptcy Advice Service on

19 V- Bankruptcy and your pension If I m declared bankrupt, will I lose my pension plans? Your state pension is not eligible for inclusion in the bankruptcy estate. So long as the bankruptcy order is made on a petition presented on or after 29 th May 2000 then other pension schemes approved by HM Revenue & Customs will not be included in the bankruptcy estate. As such, they will be protected against action from the trustee. Approved schemes include: Pension plans registered under section 153 of the Finance Act 2004 (HM Revenue and Customs schemes, and annuity contracts securing benefits under a registered scheme that do not pay immediately). Retirement annuity contracts. Personal pension schemes approved by HMRC for tax purposes. Stakeholder pensions. Other schemes are eligible, including those that are unapproved, which can be protected with a court exclusion order or qualifying agreement with the trustee. If there are doubts as to whether your pension will be exempt or included in the bankruptcy proceedings, the Official Receiver will contact your provider for details, and follow this with written confirmation as to what the exact situation is. In any instance, we recommend contacting the Bankruptcy Advice Service to discuss your pension and how it will be affected. My pension does fall into the bankruptcy estate- what now? The official receiver or trustee can claim both lump sum and regular payments, even after you are discharged from bankruptcy. In some situations the bankrupt may have an option to buy back interest in the policy from the trustee, a proposal that needs to be discussed with the trustee and officially agreed. What happens to future pension payments to me once I am bankrupt? All future payments prior to discharge from bankruptcy will be eligible for the trustee to claim, even if the plan itself is excluded. This will usually be included within an Income Payments Order or Income Payments Agreement in a similar way to wages and salaries. Should I keep up with my contributions to the pension? This is entirely up to you- in some cases continuing to pay into the scheme may not be in your best interests. However, depending on the terms of your plan, failing to continue paying money in may incur a forfeit.

20 What would happen if I died before being discharged from bankruptcy? For those with a death benefit policy, if the scheme does not nominate a beneficiary then the trustee can claim the death benefit. In all instances, we recommend contacting The Bankruptcy Advice Service on

21 VI- Bankruptcy and your motor vehicle Will my car be sold? In the event of a successful bankruptcy petition any vehicles you own will be considered assets, and may be sold by the Official Receiver or trustee. However, the following circumstances will be considered: Is the motor vehicle essential for employment or income because: - You use it on the job - Travelling to your place of work would be difficult without a car - Finding work would be more difficult without a car, irrespective of employment at the time of the bankruptcy order - The vehicle is required for your role as a full time carer Is the motor vehicle an essential domestic requirement because: - There are genuine needs that demand a car, not convenience - You have a disability and there is proof a car gives you an increased level of independence - There is no alternative for taking children to and from school, with both walking and cycling deemed impractical Although the Official Receiver may agree the vehicle is essential based on those grounds, in instances where the car is valuable a cheaper alternative will be provided at a guideline price of This means your car may still be sold unless you can prove why you need a more expensive model. How much will my car be valued at? The Official Receiver will take ownership of any vehicle not exempt from the bankruptcy order, and use a price guide to realise the value, aside from instances involving specialist or vintage models, wherein an agent or professional will be consulted. Is there any way I can still keep my car? Yes, providing: A current insurance certificate, registration document, and roadworthy certificate can be obtained. A third party will pay the guide price in cash, banker s draft, or building society cheque, and transfer the car over to you. Can I keep my number plate? In any event, the Official Receiver will have any personalised registration valued. This can be bought back if a third party is willing to pay the costs.

22 What if the vehicle has no value? It may be possible to agree a sale price at a nominal amount, including any value left in the road fund licence. This includes vehicles that are not roadworthy, which the Official Receiver can sell to you for a token fee, providing you sign a declaration stating the vehicle will not be driven or parked on the public highway until it is fixed. The Official Receiver can also arrange for any unwanted vehicles to be disposed of responsibly. My vehicle was bought on finance- what happens now? Hire purchase, leasing agreement or conditional sale means you do not own the vehicle. Terms and conditions vary from company to company, but it is highly likely that the firm will end the arrangement, and take back the vehicle following bankruptcy. The value of the vehicle will be judged based on the finance company s report to the Official Receiver, which details the settlement figure and any outstanding payments. If a sale would benefit your bankruptcy then this will be arranged, otherwise the vehicle will be returned to the financier. When repayments are up to date, a third party may be able to take over the agreement, based on the decision of the company.

23 VII- Cancelling your bankruptcy Can my bankruptcy be cancelled? A bankruptcy annulment is the only way in which bankruptcy can be cancelled, and can only be made by the court, under the following circumstances: The bankruptcy order was illegitimate and should not have been made (i.e. the proper procedures were not followed). All associated debts and fees have been paid in full, or secured to the court s satisfaction. You have come to an Individual Voluntary Arrangement with any outstanding creditors (for more information see Section VIII of this guide; Alternatives to bankruptcy). How do I apply for an annulment if the bankruptcy order should not have been made? Under section 282(1)(a) of the Insolvency Act 1986 you should: Obtain Form 7.1A from The Insolvency Service or your court. Provide a statement of truth explaining the grounds on which you believe the order to be illegitimate. Both documents should be given to the court before a date to hear the application is set, which you are required to attend. In addition you must: Notify the Official Receiver, bankruptcy petitioner, and trustee of the hearing location, date and time as a matter of urgency, sending copies of the statement of truth and Form 7.1A. All fees and expenses from the bankruptcy will be due soon after the hearing. The court will decide who is responsible to meet these costs.

24 How do I apply for an annulment if my debts are now cleared? If you have no more outstanding debts associated with the bankruptcy, and have paid all fees and expenses in full, then you should: Obtain Form 7.1A from The Insolvency Service or your court. Provide a statement of truth explaining how and when creditors and costs have been met. Personal assets are often not eligible in light of the bankruptcy order, but if you have been discharged personal money can be included in this report. Both documents should be given to the court before a date to hear the application is set, which you are required to attend. Again, you must also: Notify the Official Receiver and trustee of the hearing location, date and time as a matter of urgency, sending copies of the statement of truth and Form 7.1A. Once this is done a report will be issued to the court by the Official Receiver or trustee confirming debts have been settled or secured, which can also include details of your behaviour during bankruptcy. How do I apply for an annulment if I have entered into an Individual Voluntary Arrangement? The insolvency practitioner will call a meeting of creditors. An application to the court for annulment can be made 28 days after the meeting chairperson has reported that all creditors agreed to the arrangement. Follow the same procedure as if the bankruptcy order was illegitimate, but with a statement of truth explaining why the Individual Voluntary Arrangement was issued in error. What happens if my bankruptcy is annulled? Once an annulment has taken place your financial status will revert to what it was before the bankruptcy. Any assets and monies disposed of by the Official Receiver or trustee will not be reversed, all other funds remaining will be returned to you. Your bankruptcy will be removed from the Individual Insolvency Register within five days after cancellation, and if creditors have agreed to an Individual Voluntary Agreement (see Section VIII of this guide; Alternatives to bankruptcy) then details will be placed on the register. The HM Land Registry can cancel the registration of your bankruptcy upon requestthis should be made in the order for annulment by asking the court to include this requirement, although you may have to contact the department yourself to action the change.

25 VIII- Alternatives to bankruptcy It s always advisable to pursue other forms of debt management, consolidation and insolvency before attempting to file bankruptcy proceedings. Information is available from a range of sources, including independent financial advisors and nationwide organisations. We recommend contacting The Bankruptcy Advice Service on for professional guidance to ensure you are aware of all the options available. Some of the most common debt solutions currently open to UK taxpayers include: DRO- Debt Relief Order If total your debts are under 15,000, with no more than 50 surplus month-end cash after living costs, and no property or assets are worth in excess of 300 (with the exception of cars valued up to 1,000), then you are eligible for a DRO. This is a comparable procedure to bankruptcy, with serious implications. A Debt Relief Order application must be submitted to an Official Receiver by a professional third party, at the cost of 90. This fee is non-refundable, even if you are declined. If accepted all debts will be written off within 12 months, no interest or charges will be applied within this period, and creditors cannot chase for payments. This will seriously affect your credit rating. IVA- Individual Voluntary Arrangement By signing up to an IVA you agree to a legally binding process that will help you clear unsecured debts, such as overdrafts, credit cards, and utility bills. An insolvency practitioner will be allocated to assist in arranging the process, and developing a proposal of paybacks to creditors based on income. An IVA proposal must be accepted by 75% of the total creditors in order to be approved. Once approved it is imperative that the arrangement is maintained- this usually lasts for around five years. At this point all remaining debts will be written off, with creditors unable to chase the outstanding money. A fee is involved in setting up an IVA, and this will affect your credit rating. DMP- Debt Management Plan A Debt Management Plan can be arranged through a debt management company or charity. Designed for people that are financially unable to meet all required repayments, but do have some month-end surplus, this is one of the least severe courses of action to take. Put simply, a DMP consolidates all debts into one. A specialist advisor puts together a creditor proposal with reduced payments, frozen interest, and no charges, leaving you with a simple, single monthly bill. A debt management plan can usually be arranged for free, however this may affect your credit rating, and needs to be accepted by creditors.

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