Bankruptcy – What Are My Rights?

If you have insufficient assets to meet your unsecured debts, you can voluntarily file a petition for bankruptcy. If you’re faced with overwhelming unsecured debts, such as credit card or personal loan debts, which you’ll never be able to repay, bankruptcy allows you to make a fresh start financially. However, once you are made bankrupt you must follow a set of rules, known as bankruptcy restrictions. Your assets, including your home and car, your confidentiality and your employment prospects may all be affected, so bankruptcy should always be a last resort.


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Legal Obligations

Bankruptcy is managed by an officer of the bankruptcy court, known as an official receiver. You must cooperate fully with your official receiver, including handing over your bank account and credit cards and agree not to make payments to your creditors. Your bank will freeze any accounts you have and may forbid you to open any new accounts.


If you’re a homeowner and there’s equity in your home – that is, its monetary value exceeds any amount owed on it in mortgages and other claims – the official receiver may ask you to sell it. If there’s no equity in your home, you may not need it sell it, but you’ll still need to pay your mortgage and any other loans secured on it after you’re made bankrupt.


Similarly, if you own a vehicle you’ll need to give it up altogether or downsize to cheaper model. If you own it outright, the official receiver may require that you sell it. If you can prove that a car is essential, you may receive a proportion of the money from the sale of your original car to pay for a replacement. If you’re paying for a car through a finance package, the finance company will probably terminate your credit agreement and repossess the car.


The extent to which bankruptcy affects your current and future employment depends, to some degree, on the work you do. Bankruptcy restrictions forbid you from acting as a director of a company or working as an insolvency practitioner. Similarly, you can’t work in any role regulated by the Financial Services Authority (FSA), as a trustee of a charity or as a solicitor if you’re bankrupt. Check your employment contract before filing for bankruptcy or you may find yourself out of a job and struggling to find another.


The stigma attached to bankruptcy is less than it once was, but be aware that everyone to whom you are financially connected, including your bank, building society and creditors, will be notified of your bankruptcy. Your name, address and the length of time you’re subject to bankruptcy restrictions will be made available to the public in an online database, known as the Individual Insolvency Register. In the UK, bankruptcy typically lasts for one year. However, credit reference agencies, such as Equifax and Experian, keep a record of your bankruptcy for six years, so you may have difficulty in obtaining credit long after your bankruptcy is discharged.

This guest post was written on behalf of by financial blogger and writer Francesca. She hopes that people will find her articles useful and informative.

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