What is bankruptcy?
In the last few years there's been a noticeable trend in the rise of the number of young people declaring bankruptcy, with the majority of individual bankrupts being under the age of 30.
What is bankruptcy?
Bankruptcy is a way of dealing with debts where a court makes an order against you if you are unable to pay your debts. A trustee is appointed to take over the management of your financial affairs for a limited period and to use your available income and assets, if any, to pay the creditors. The trustee is either the Official Receiver or an Insolvency practitioner.
Who is affected by bankruptcy?
Anyone can go bankrupt, including individual members of a business partnership. But remember, you don't have to become bankrupt just because you're in debt; there are other options available to you.
Last year 55% of young bankrupts were female, up from 48% five years ago. In total, 1,560 women under 24 were declared bankrupt compared with 1,250 men in the same age group.
For many it has become less of a stigma and increasingly a lifestyle choice in order to write off the debts they owe.
How am I made bankrupt?
By debtor's petition: this is where you make yourself bankrupt. To do this you must contact your local court to find out where your nearest county court dealing with bankruptcy is situated. If you live in London you should contact the High Court. You have to pay a £150 court fee and £360 deposit.
By creditors' petition: If you owe people £750 or more they can make a creditor's petition for your bankruptcy at a County Court.
Where is the bankruptcy order made?
The High Court in London or a local county court.
Who deals with my case?
The Official Receiver: a civil servant who will act as a trustee for your estate, reporting both to court and to your creditors.
An Insolvency Practitioner: licensed accountants or solicitors who can be appointed as trustee instead of the Official Receiver.
Who do I need to tell?
Your mortgage lender, if you have one, as they may repossess your house if you can't pay.
Banks and building societies: when opening new accounts you must tell them you are bankrupt, just as you must inform your trustee of any money in the account above that needed for basic living expenses.
Utilities companies (phone, electricity, gas): they often want a deposit in advance for their services.
When will it end?
You are usually discharged from bankruptcy after one year and most of the money you owe can be written off. There are some exceptions, including:
- Court fines
- Maintenance payments and/or child support payments, although the court can order that all or part of the debt is not payable
- Student loans
- Debts arising from personal injury claims, although a court can order that all or part of the debt is not payable
- Debts incurred through fraud
- Any matter the trustee is still working on
- Certain benefit and tax credit overpayments if the decision about recoverability of benefit is made after the date of the bankruptcy order. In this case, benefit overpayments can be recovered through deductions from benefits and tax credit overpayments through deductions from tax credits.
