Bankruptcy

A decision to opt for bankruptcy needs to be carefully considered and, subsequently, well managed to protect income and assets as fully as possible. The law in relation to Bankruptcy (Enterprise Act 2003) has recently changed making it easier for people to make a fresh start. All unsecured debts are written off in bankruptcy therefore creditors must stop chasing the debts.

Advantages

• All debts are completely written off.
• Creditors are legally obliged to stop chasing the debt.
• After 6 to 12 months the bankruptcy is discharged and the client has no further obligations.
• In financial terms, it gives clients a fresh start.

*If the Official Receiver decides there is
disposable income, there can be a three year
liability.

Disadvantages

• Until discharge the bankrupt cannot be a director of a limited company.
• lf the client has significant assets, like a car or equity in a house, they will normally be sold by the Official Receiver and the funds distributed to creditors; however there are ways to address this.
• lf the client has any disposable income, 50% to 70% of that income will be payable to the court for three years.

Case Study - Bankruptcy

Mr and Mrs C had already remortgaged their home and were unable to re-mortgage to clear £60,000 of debts. They also had mortgage arrears. We
bought the family home and entered into a shorthold tenancy agreement with them for up to five years. The rent on the property is £57O per month, a saving of £6OO per month compared to previous mortgage and arrears payments. Mr and Mrs C were helped through bankruptcy; are now discharged from bankruptcy; are debt free; and with our guidance can keep to budgets and have disposable income each month. Their family, friends and neighbours don’t know that they are renting their home which they aim to buy back within four years.