HOW BANKRUPTCY WILL AFFECT YOU
What happens to your home
If you own your home, whether freehold or leasehold, solely or jointly, mortgaged or otherwise, your interest in the home will form part of your estate which will be dealt with by your trustee. The home may have to be sold to go towards paying your debts.
Your bank account
When the bankruptcy order is made, you should immediately stop using your cheque books and bank cards; and hand them over to the Official Receiver as soon as possible.
In relation to your creditors
If you are made bankrupt, you must not make payments direct to creditors. Creditors to whom you owe money when you are made bankrupt make a claim to your trustee (that is, either the Official Receiver or an insolvency practitioner).
Payment to creditors
The Official Receiver will tell your creditors that you are bankrupt.
Your Assets
You will no longer control your assets.
Your pension
A trustee cannot usually claim a pension as an asset if your bankruptcy petition was presented on or after 29 May 2000, as long as the pension scheme has been approved by the Inland Revenue.
For petitions presented before 29 May 2000, trustees can claim some kinds of pensions. If you are receiving a pension or become entitled to do so before you are discharged, the pension is included as income for the purposes of an income payments order (IPO).
For more information on bankruptcy and your pension please click here.
Your life assurance policy
Generally, your trustee will be able to claim any interest that you have in a life assurance policy.
The trustee may be entitled to sell or surrender the policy and collect any proceeds on behalf of your creditors. If the life assurance policy is held in joint names, for instance with your husband or wife, that other person is likely to have an interest in the policy and should contact the trustee immediately to discuss how their interest in the policy should be dealt with.
You may want the policy to be kept going. Ask your trustee: it may be possible for your interest to be transferred for an amount equivalent to the present value of that interest.
If the life assurance policy has been legally charged to any person, for instance an endowment policy used as security for the mortgage on your home, the rights of the secured creditor will not be affected by the making of the bankruptcy order. But any remaining value in the policy may belong to your trustee.
Work-related registrations, licences and permissions
Any registration, licence or permission you hold in connection with your work or trade might be affected by the making of the bankruptcy order.
You should inform the person who issued the registration or authority of your bankruptcy to establish if it will remain in force or will be cancelled or withdrawn. Any value attaching to these items may belong to the trustee. In considering this issue you should disregard items of a personal nature such as a driving licence.
Your business
If you are self-employed, your business is normally closed down and any employees are dismissed.
Any business assets will be claimed by the trustee unless they are exempt and you will have to give the Official Receiver all your accounting records. You are still responsible for completing all tax and VAT returns. Your employees may be able to make a claim to the National Insurance Fund for outstanding wages and holiday pay, payment in lieu of notice, and redundancy. Employees can claim in the bankruptcy for any money owed that is not paid by the National Insurance Fund.
For further details, you should contact the Redundancy Payments Service on free phone 0800 585811.
There is nothing to prevent a bankrupt from being self-employed. So you can start to trade again, subject to restrictions. You will be responsible for keeping accounting records for this business and for dealing with the tax and VAT requirements for the new business. You will need to register again for VAT if you meet the registration requirements. You should not continue to use your pre-bankruptcy VAT registration number.
Your wages
Your trustee may apply to court for an income payments order (IPO), which requires you to make contributions towards the bankruptcy debts from your income.
The court will not make an IPO if it would leave you without enough income to meet the reasonable domestic needs of you and your family. If you have an increase or decrease in income, the IPO can be changed.
IPO payments continue for a maximum of 3 years from the date the order is made by the court and may continue after you have been discharged from your bankruptcy. Or you may enter into a written agreement with your trustee, called an income payments agreement (IPA), to pay a certain amount of your income to the trustee for an agreed period, which cannot be longer than 3 years. There are no fixed guidelines on IPOs or IPAs - each case is assessed individually.
