Purely cos Im nosey and I was lugging into some talk, can someone please tell me what the deal is with going bankrupt.

LT, yeah, she is declaring herself bankrupt because it only lasts for a year now.

Captain, That would be my advice.

So if it only lasts a year, whats to stop me taking out a huge loan pay off all my debts and go bankrupt and then start again?

Would it last on your experien file for longer than the year?
Bankrupcy is to a degree a means of a fresh start with a clean slate, after a period of no-one wanting to touch you with a big shitty stick after you've been discharged.

If you have assets such as a house, a car etc... standby to lose them.

Reference a loan, chances are your credit rating will have suffered long before, if you are even considering bankrupcy so very few loan companies will touch you, unless secured.

When you do the deed at the county court, it will be advertised in the local press and you will be booked an appointment with the recievers who will go through your affairs with a comb and torch.... if they see you have been trading whilst insolvent or generally being a cnut and knocking everyone they will give you a hard time.

In some situations bakrupcy is the only choice, nowadays there are far more effective ways of dealign with debt management.

In the time that I served I knew of two soldiers who went bump, both were asked to leave the army sharpish.
Although it's on the increase but is definitely not to be seen as an easy way out as it has lasting effects which can make life tedious. The following is my take on it..

Bankruptcy – The facts

As our passion for credit becomes an obsession, increasing numbers of borrowers are losing control. Many people see bankruptcy as the ultimate disgrace but increasingly, people who owe thousands of pounds rather than millions are opting to be declared bankrupt to erase their debts - a move previously considered to be the absolute last resort.

Almost 12,000 people declared themselves bankrupt in the three months to the end of September 2004, a 31% jump on the same period in 2003 and the highest number in a single quarter since the figures were first compiled. The annual total is now set to hit 45,000, almost double the number in 1997 when Labour came into power.

Last resort

Since April 2004, restrictions faced by bankrupts will be cleared after 12 months instead of the three years it used to take. This may go part of the way to explaining the sharp increase in UK bankruptcies. Although the figures, released by the Department of Trade and Industry's Insolvency Service, include bankruptcies among small businesses, analysis by economists showed that more than 70% comprises consumer debtors - people going bust through spending on credit cards and personal borrowing. The figures fuel concerns that the system is being abused by ordinary people seeking a quick exit from financial problems as they are choosing bankruptcy as a way out rather than being forced into it.

Debt nation

Making ends meet is tough enough on a whole salary, but many Britons don't even have that luxury. Figures from Debt Free Direct reveal that 2.6 million people spend at least half of their monthly income paying off debts, whether mortgages, credit and store cards, overdrafts or loans. Problems have been exacerbated by rising interest rates but this has not stopped us borrowing more than £1 trillion.

Until recently, bankruptcy was becoming popular with students, who saw it as an attractive solution to the average debts of £12,000 they faced following grduation. In 2003, no fewer than 899 graduates filed for bankruptcy to wipe out their student loans - more than three times as many as the previous year. However, that loophole closed on 1 July 2004 when the Higher Education Act came into force. This stipulates that any undergraduate made bankrupt after this date may still be obliged to repay their loans.

What bankruptcy means

Anyone can go bankrupt, but despite the relaxation of rules and increased appeal, it is by no means an easy option.

Bankruptcy proceedings free you from overwhelming debts so you can make a fresh start - subject to some restrictions - and make sure your assets are shared out fairly among your creditors.

A court makes a bankruptcy order after a petition has been presented by you or by one or more creditors who are owed at least £750 in unsecured debt by you. A bankruptcy order can still be made even if you refuse to acknowledge the proceedings or refuse to agree to them. You should therefore co-operate fully once the bankruptcy proceedings have begun. If you dispute the creditor's claim, you should try and reach a settlement before the bankruptcy petition is due to be heard as this can difficult and expense to address after the event. The bankruptcy order is then advertised in The London Gazette, an official publication which contains legal notices and in a local or national newspaper, or both.

How it will affect you

Once a bankruptcy order has been made, you must comply with a number of requests from the Official Receiver (OR). These include providing documentation and a full list of assets. You must stop using your bank, building society, credit card and similar accounts straightaway and cannot obtain new accounts or credit of £500 or more from any person without first disclosing the fact that you are bankrupt. You may also have to go to court and explain why you are in debt. If you do not co-operate, you could be arrested.

You will no longer control your assets including the contents of your home. The OR will decide whether the value of your possessions is more than the cost of a reasonable replacement. Any assets seized will be disposed of by the OR or an insolvency practitioner - appointed as trustee - to pay the fees, costs and expenses of the bankruptcy and then your creditors.

You may also be required to make contributions towards the bankruptcy debts from your income. This will be based on afforability and is kept under review. 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. However, they will be able to claim your life assurance policy.

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. If your husband, wife or children are living with you, it may be possible for the sale to be put off until after the end of the first year of your bankruptcy to provide an opportunity for other housing arrangements to be made.

You will no longer have to make payments direct to creditors, although there are some exceptions, such as your mortgage lender. If you owe money to utilities suppliers they may not chase the debts but could ask your pay in advance for services or put the account in a partner's name. The OR will liaise direct with creditors to arrange any payments.

What happens when you are discharged

You will be automatically freed from bankruptcy - 'discharged' - after a maximum of 12 months or sooner if the OR concludes his enquiries. Discharge releases you from the debts you owed at the date of the bankruptcy order.

However, when you are discharged there may still be assets, such as your home, that either owned when your bankruptcy began, or which you obtained before your discharge. These remain under the control of the trustee and can be sold at any time after your discharge. If your spouse, a relative or friend wants to buy your interest they should contact the trustee straightaway.


If you have exhausted all avenues in attempts to resolve your debt problems, including taking advice from specialist counsellors, there are still alternatives to bankruptcy.

If one or more of your creditors has obtained a court judgment against you, the county court may make an administration order. This allows you to make regular payments to the court towards the money you owe your creditors. To qualify, your total debts must not be more than £5,000 and you will need enough regular income to make weekly or monthly repayments. There are no fees involved but the court will take a small percentage from the money you pay towards its costs. If you do not pay regularly, the order could be cancelled and you may become subject to the same restrictions as someone who is bankrupt.

A more formal version of the administration order is an individual voluntary arrangement (IVA). This begins with a formal proposal to your creditors to pay part or all of your debts. You need to apply to the court and must be helped by an insolvency practitioner who will charge a fee. Any agreement reached with your creditors will be binding on them.

There is no maximum or minimum level of debt and no maximum or minimum level of repayments, except what is acceptable to your creditors. IVAs can work well if you have friends or relatives prepared to help pay or contribute towards paying your debts or your income enables you to pay regular sums to creditors. They also allow you to retain more control over your assets, including your home and you can avoid the restrictions of bankruptcy.

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