The following leaflet is published by The Insolvency Service
When Will My Bankruptcy End?
Information on discharge from bankruptcy
This leaflet covers the questions you are most likely to want answered about your discharge from bankruptcy:
What is "discharge from bankruptcy"?
When will I be discharged?
How do I get my discharge?
What is the effect of the discharge?
What is "annulment of bankruptcy"?
How do I obtain further information?
What is "discharge from bankruptcy"?
It is a process which frees you from the restrictions of bankruptcy and releases you from most of the debts you owed at the date the bankruptcy order was made.
When will I be discharged?
Usually after 3 years - on the third anniversary of the date of your bankruptcy order.
There are three main exceptions to this:
If your bankruptcy order refers to a "certificate for summary administration", you will be discharged after 2 years (a certificate can be issued if you presented your own petition for bankruptcy and your unsecured debts are less than the small bankruptcy level - currently £20,000).
If your unsecured debts are found to be more than the small bankruptcy level, the Official Receiver will ask the court to revoke the certificate and your discharge will be after 3 years.
If this happens the Official Receiver will notify you.
If you have been bankrupt before at any time in the last 15 years, you will have to apply to the court for your discharge. You cannot do this until 5 years after your latest bankruptcy.
If you do not co-operate with the Official Receiver or the trustee (if an insolvency practitioner has been appointed as trustee in place of the Official Receiver), the court may be asked to stop your discharge from taking place. An example would be if you refused to provide information to the Official Receiver or the trustee.
How do I get my discharge?
You will normally get your discharge automatically even if no payments have been made to your creditors. If you are discharged automatically, you do not have to do anything to get your discharge.
If you wish, you can obtain a certificate of discharge. A certificate is not necessary in most cases but if you need one, you should write to the court which dealt with your bankruptcy. Do not write sooner than 2 weeks before your discharge date. Give your name, address and court reference number (to be taken from the latest correspondence about your bankruptcy).
The court will check with the Official Receiver that you are entitled to an automatic discharge. You should receive a certificate confirming your discharge within about 4 weeks.
There is a fee of £50 payable to the court for issuing a certificate of discharge.
You can also ask for your discharge to be advertised by the Official Receiver but you will have to pay the costs of this before it is done.
You will not get your discharge automatically:
if you have been an undischarged bankrupt at any time in the last 15 years. In this case you will have to apply to the court. You should notify the Official Receiver who will report to the court on your co-operation, the reasons for your bankruptcy and how much you owe to creditors. You will need to pay a deposit to the Official Receiver to cover the costs of reporting to the court. Please contact the Official Receiver for more information;
if your discharge period has been suspended, for example because you have failed to co-operate with the Official Receiver or trustee;
if you are subject to a criminal bankruptcy order. Please contact the Official Receiver for more information.
What is the effect of the discharge?
Your debts - you will be freed from most debts which you incurred before the bankruptcy order. You can now obtain credit without having to mention your bankruptcy (unless you are specifically asked to do so) but you will want to ensure that you can repay it.
The debts you are not freed from include:
- any money owed under family court proceedings (for example, maintenance) or arising from any personal injury claims against you unless the court directs otherwise;
- any fines or debts arising from fraud or certain other crimes;
- debts you incur after the bankruptcy order.
Your mortgage payments - please note that secured creditors (lenders who hold security such as a mortgage for the money owed) still have the right to enforce or recover their security if payments are not met. You should consider contacting your mortgage lender about your mortgage payments and your discharge from bankruptcy.
Your assets - any assets which the Official Receiver or the trustee held or claimed during your bankruptcy remain under the control of the Official Receiver or the trustee. They are not returned to you on discharge. It may be some time after your discharge before all your assets, such as your home, are dealt with.
Your business - after discharge you can carry on a business without the restrictions which applied during your bankruptcy. You can act as a director of a limited company or be involved in its management (unless you are subject to a separate disqualification order).
Your obligation to co-operate with the Official Receiver and trustee - you must continue to assist the Official Receiver and the trustee, for example by providing any information requested, even after your discharge. If you do not, you could be liable to contempt of court.
The following paragraphs explain what will happen to public records of your bankruptcy:
The Insolvency Service’s Individual Insolvency Register - The Individual Insolvency Register contains records of bankruptcy orders and individual voluntary arrangements in England and Wales. The record of your bankruptcy will remain on the register for five years from the date of the order.
The Individual Insolvency Register is at The Insolvency Service, 5th Floor, West Wing 45-46 Stephenson Street, Birmingham B2 4UP, telephone: 0121 698 4000 fax: 0121 698 4406.
For further information, a leaflet called The Individual Insolvency Register is available from your local Official Receiver’s office or from the Insolvency Service Publication Order Line (see page 7).
HM Land Registry - bankruptcy petitions and orders are registered at the Land Charges Department of HM Land Registry. These entries remain on the register for 5 years from the date of registration. Discharge has no effect on this. The Official Receiver or trustee can apply for entries to be renewed beyond the 5 years, for example if the discharge has been suspended.
If you own property which is registered in your sole name, a creditor’s notice (to protect the rights of creditors) and a bankruptcy inhibition (to prevent dealings with the property) may also have been registered against the title to the property. If the property is registered in joint names, a caution (against dealings) may have been registered against the title. Discharge has no effect on this.
Credit Reference Agencies - the Official Receiver does not send any form of notice to credit reference agencies. The agencies pick up information from other sources such as advertisements of bankruptcies in newspapers, "The London Gazette" and the Register of County Court Judgments. If no advertisement of your discharge from bankruptcy or the annulment of the bankruptcy order is made, separate information will have to be provided to credit refererence agencies to amend their records.
For further information, a leaflet called "No Credit?" is produced by the Officer of The Data Protection Commisioner - telephone 0870 44 21 211.
What is "annulment of bankruptcy"?
This is a procedure by which a court cancels the bankruptcy order it has made. This can happen if it turns out that your bankruptcy order should not have been made; if all your debts and fees and expenses of the bankruptcy have been paid in full; or if your creditors accept proposals for settlement under a voluntary arrangement. (There is a separate leaflet on annulment of a bankruptcy order - see below)
How do I obtain further information?
This leaflet is for general guidance only. If you have further questions about how to obtain your discharge, you should ask your professional adviser or the trustee handling your bankruptcy.
If you are not sure who is acting as trustee, contact your local Official Receiver’s office. To help in tracing your case, if possible please give the name and reference number of the court which dealt with your bankruptcy. These details will be on the latest correspondence about your bankruptcy.
Please note that The Insolvency Service and Official Receivers cannot provide legal or financial advice. You should seek this from a citizen’s advice bureau, a solicitor, a qualified accountant, an authorised insolvency practitioner or a reputable financial adviser or advice centre.
Further information about bankruptcy is available in the following Insolvency Service publications:
Guide To Bankruptcy
Can my bankruptcy be cancelled?
Information on annulment of a bankruptcy order
To obtain these or more copies of this leaflet, please contact your local Official Receiver’s office or or contact The Insolvency Service Publications Order Line on 0121 698 4241. You can also write to:
The Insolvency Service Publications Orders
Records Management
4th Floor East
Ladywood House
Birmingham
B2 4UZ
A range of Insolvency Service publications also appears on The Insolvency Service Internet website at www.insolvency.gov.uk
This booklet provides general information only. Every effort has been made to ensure that the information is accurate, but it is not a full and authoritative statement of the law and you should not rely on it as such. The Insolvency Service cannot accept any responsibility for any errors or omissions as a result of negligence or otherwise.
Guide to Bankruptcy
1. About this guide
This guide tells you what happens if you are made bankrupt in England and Wales and about some of the alternatives to bankruptcy.
This booklet is for general guidance only. If bankruptcy proceedings are taken against you, or you are thinking of making yourself bankrupt, you should seek your own legal or financial advice from a Citizens Advice Bureau, a solicitor, a qualified accountant, an authorised insolvency practitioner, a reputable financial adviser or a debt advice centre.
Other organisations also offer insolvency advice and debt counselling. Some of them are entirely reputable and offer a professional service. However, others are controlled by individuals with no obvious qualifications who appear to be motivated mainly by a desire to exploit an already difficult situation. Beware, particularly of unsolicited approaches through the post or by telephone.
a. If you are not bankrupt
Bankruptcy is a serious matter. You will have to give up any possessions of value and your interest in your home. (Section 7 gives details of things you do not have to give up.) It will almost certainly involve the closure of any business you run and the dismissal of your employees. Bankruptcy will also impose certain restrictions on you.
You do not have to become bankrupt just because you are in debt. Look at the alternatives to bankruptcy as soon as possible in case they are more suitable in your situation. (See section 14.)
b. If you are already bankrupt
Sections 2-13 explain the bankruptcy procedure. The Official Receiver will give you further instructions. You can still propose a voluntary arrangement (details in section 14) which could annul the bankruptcy.
A separate leaflet called "Can my bankruptcy be cancelled? Information on annulment of a bankruptcy order" is available from your local Official Receiver’s office. You should consider this leaflet if you think that you should not have been made bankrupt or if all your bankruptcy debts and the fees and expenses of the bankruptcy proceedings can be paid or secured in full.
2. What is bankruptcy?
Bankruptcy is one way of dealing with debts you cannot pay. The bankruptcy proceedings:
free you from overwhelming debts so you can make a fresh start, subject to some restrictions (see section 10); and
make sure your assets are shared out fairly among your creditors.
Anyone can go bankrupt, including individual members of a partnership. There are different insolvency procedures for dealing with companies and for partnerships themselves. Separate leaflets about these insolvency procedures are available (see section 16).
3. How are you made bankrupt?
A court makes a bankruptcy order only after a bankruptcy petition has been presented. It is usually presented either:
by yourself (debtor’s petition); or
by one or more creditors who are owed at least £750 by you and that amount is unsecured (creditor’s petition).
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. Trying to do so after the bankruptcy order is made is both difficult and expensive.
4. Where is the bankruptcy order made?
Bankruptcy petitions are usually presented at the High Court in London or a county court near to where you trade or live. A petition can be presented against you even if you are not present in England or Wales at that time. This can happen when:
you normally live in, or within the previous 3 years have had residential or business connections with, England and Wales.
If you want to make yourself bankrupt, a separate leaflet called "Dealing with Debt: How to petition for your own bankruptcy" is available (see page 16)
Sometimes government departments start bankruptcy proceedings in the High Court in London or in one of the District Registries. If you did not trade or do not live in the London area, your case will usually be transferred to the appropriate local county court and dealt with by the local Official Receiver, if a bankruptcy order is made.
Once the bankruptcy order has been made, it is advertised in "The London Gazette" (an official publication which contains legal notices) and in a local or national newspaper (or both). In addition the Official Receiver will give written notice of the order to a number of organisations (see section 5).
5. Who will deal with your case?
a. The Official Receiver
An Official Receiver is appointed by the Secretary of State and is an officer of the court. The Official Receiver has responsibility for administering your bankruptcy and protecting your assets from the date of the bankruptcy order. He or she will also act as trustee of your bankruptcy estate unless an insolvency practitioner is appointed.
The Official Receiver is also responsible for looking into your financial affairs for the period before and during your bankruptcy. He or she may report to the court and has to report to your creditors. There will also be a need to report any matters which indicate that you may have committed criminal offences in connection with your bankruptcy.
The Official Receiver will give notice of the bankruptcy order to local authorities, utility suppliers, courts, sheriffs, bailiffs, Premium Bond Office, Land Registry and any relevant professional bodies. Enquiries will also be made of banks, building societies, mortgage, pension and insurance companies, solicitors, landlords and any other persons or organisations who may be able to provide details of any assets or liabilities that you have, or have had, an interest in (either on your own or jointly with others). Third parties will also be asked about any other matters relating to your bankruptcy.
b. An insolvency practitioner
Insolvency practitioners are individuals who specialise in insolvency work. An insolvency practitioner, who must be authorised, can be appointed trustee instead of the Official Receiver. He or she is then responsible for disposing of your assets and making payments to your creditors.
6. What are your duties as a bankrupt?
When a bankruptcy order has been made, you must:
comply with the Official Receiver’s request to provide information about your financial affairs. The Official Receiver may request that you attend at his or her office for an interview - the Court will give you the address of the Official Receiver. (Note, usually before the interview, you will be sent or given a questionnaire which you should fill in as fully and accurately as possible.) If the Official Receiver does not ask that you attend at the office for an interview, you will be sent a letter which will set out what is required of you. Again it is likely that you will be asked to complete a questionnaire. You should note that in either circumstance, any questionnaire completed before the bankruptcy order, supplied to you by an advisor or another third party, will not be acceptable;
give the Official Receiver a full list of your assets and details of what you owe and to whom (your creditors);
look after and then hand over your assets to the Official Receiver together with all your books, records, bank statements, insurance policies and other papers* relating to your property and financial affairs;
tell your trustee about assets and increases in income you obtain during your bankruptcy. (Note: by law you must inform your trustee of any property which becomes yours during the bankruptcy. Such property includes lump sum cash payments that you may receive, for example, redundancy payments, property or money left in a will);
stop using your bank, building society, credit card and similar accounts straightaway (see section 10);
not obtain credit of £250 or more from any person without first disclosing the fact that you are bankrupt (see section 10);
not make payments direct to your creditors (but see section 7a).
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.
*Your books and papers will normally be destroyed after your trustee has finished with them. However, you can have them back, provided they have not already been destroyed, if the court annuls your bankruptcy (see section 11).
7. How will bankruptcy affect you?
a. 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). They should not ask you directly for payment; if you receive any requests, pass them immediately to your trustee to deal with and tell the creditor that you are bankrupt. There are some very limited exceptions to this non-payment rule. The main ones are:
secured creditors, such as creditors who have a mortgage or charge on your home (if mortgage payments are not made, the lender may sell your home);
non-provable debts, such as court fines and other obligations arising under an order made in family proceedings or under a maintenance assessment made under the Child Support Act 1991, and student loans made under the Education (Student Loans) Act 1990. Non-provable debts are not included in the bankruptcy proceedings and you are still responsible for paying off such debts; and
benefit overpayments, where the DSS can recover any benefit overpayments from any further benefits you receive.
Student loans made under the Education (Student Support Regulations 1999 following the Teaching and Higher Education Act 1998 are included in bankruptcy proceedings, so you should not make payments direct to the loans administrator.
Suppliers of services to your home (gas, electricity, water and telephone) may not demand from you payment of bills in your name which are unpaid at the date of the bankruptcy order. But they may ask you for a deposit towards payment for further supplies or could arrange for the accounts to be transferred into the name of your spouse or partner. You must pay continuing commitments such as rent (if you rent your home), together with any debts you incur after the bankruptcy.
b. Your assets
You will no longer control your assets.
You can keep the following items unless their individual value is more than the cost of a reasonable replacement:
tools, books, vehicles and other items of equipment which you need to use personally in your employment, business or vocation;
clothing, bedding, furniture, household equipment and other basic items you and your family need in the home.
All these items must be disclosed to the Official Receiver who will then decide whether you can keep them.
The Official Receiver/trustee will take control of all your other assets on the making of the bankruptcy order. He or she, or any insolvency practitioner who is appointed as trustee, will dispose of them and use the money to pay the fees, costs and expenses of the bankruptcy and then your creditors.
The trustee may apply to the court for an order restoring property to him or her if you disposed of it in a way which was unfair to your creditors (for example, if before bankruptcy you had transferred property to a relative for less than its worth).
The trustee may claim property which you obtain or which passes to you (for example, under a will) while you are bankrupt.
If a balance of the loan remains payable, a student loan* made before or after the start of a student's bankruptcy, is not regarded as an asset that the trustee may claim.
*under the Education (Student Loans) Act 1990, and the Education (Student Support) Regulations 1999, following the Teaching and Higher Education Act 1998.
c. 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. A separate leaflet called “What will happen to my pension?” is available from your local Official Receiver’s office or The Insolvency Service Publications Order Line (address on back cover).
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 IPO (see section 7g).
d. 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.
e. 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.
f. 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 (see section 7b) 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
0500 848489.
There is nothing to prevent a bankrupt from being self-employed. So you can start to trade again, subject to the restrictions in section 10. 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.
g. 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 until you are discharged from bankruptcy.
There are no fixed guidelines on IPOs - each case is assessed individually.
A range of Insolvency Service publications also appears on The Insolvency Service Internet website at www.insolvency.gov.uk
I purchased my own business with the proceeds of the sale of my house, my savings and a large
business loan. I did not take money out of the business other than for essential living expenses.
The bank called in the loan and as I could not repay it they brought in the Official Receiver.
I declared myself bankrupt.
Should I have taken out an income for myself throughout the duration of the business?
What are the benefits of making yourself bankrupt or waiting for someone else to make you bankrupt?
As soon as the Official Receiver was brought in a number of people where giving me advice of
what I should and should not have done. What are the answers for a single person?
ANSWER
The carrying on of a business that you purchased as a sole trader means that you as principal
of that business are entitled to all the assets of the business but correspond are responsible
for all the liabilities attaching to the business.
There is no distinction for the purposes of bankruptcy between assets that are yours and form
part of the business and assets that you withdraw from the business and form personal savings or
investments.
In the event that the business fails, all of your assets are exposed to meet the claims of your
creditors and therefore by withdrawing money from the business to form savings will not preclude
those assets being exposed to the claims of your creditors.
Having identified that you are insolvent with no prospect of recovery and it may be appropriate
to seek independent advice on your position. A debtor can file a petition for bankruptcy in the
County Court for the insolvency district in which he has resided or carried on business for the
longest period in the last six months. The court will then appoint a trustee in bankruptcy to
deal with creditors claims.
Before presenting a petition it would be wise to seek independent advice from an insolvency
practitioner who should be a member of the Insolvency Practitioners Association for if you have
a temporary insolvency but do have a potential profitably continuing business, it is possible to
consider alternatives other than bankruptcy including formal or informal arrangements with
creditors.
This answer was supplied by Butt Cozens, Chartered Accountants 23rd October2001.
This is the type of response you may receive from an accountant and there may be a fee for this
information.
ANSWER
I bought a business for £450,000. I had been trading for 20 months when the bank called in a
trade adviser to go through my plans for the business, future bookings and come up with a plan
for moving forward. After in depth discussions it was agreed that I had a viable business which
had taken time to turn around and was not being given adequate support and advice from my
accountant and bookkeeper. It was agreed that the trade adviser would work with me and support
me over a six month period and that I should change immediately to a company who would provide
a combined service at a much reduced fee and provide a quicker turn around of the information.
The bank called in the loan the following month even though the trade adviser had submitted his
report to the bank.
The business was sold for £185,000 which meant that I had lost everything. I was recently
speaking to an accountant who said that I could have arranged with the bank that rather than
them loose money by selling the business at a lose I could have come to an arrangement whereby
the business stayed in my name and I paid them a percentage of the profits which would have
worked out to have been greater than the amount they received from the sale of the business.
Obviously it would have been more complex than this but the principle is here.
I was worried when the bank turned up at 9am on a Monday morning with a letter calling in the
loan and the Receiver arriving at 11am. The Receiver and his representatives went through the
business and listed all of the assets and kept asking questions and asking for information. It
was extremely frightening and I didn't know where to turn for help and advice. If you are in
business and the turnover is going down seek help before you end up in the same position as me.
Name Recovering, Wiltshire Date 1st November, 2001
Has anyone been through similar circumstances and had a different solution which has worked?
Let us know
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QUESTION 9 INSOLVENT ESTATE
I am 67 married for 47 years my husband is 71. We live in our jointly owned
house/home (freehold) which carries a mortgage of £42,500 and is valued at
£130,000. The interest on the mortgage we have is paid by the dss, we are on
income support, and the liability to pay off the mortgage capital sum has
been waived by the building society until we are both dead.
We are thinking of transferring the ownership of the house to me alone, which
the building society has agreed to, to avoid my husbands credit card debts ?
Which I think may possibly turn out to be just bad debts to the credit card
companies. I feel they could not come on to me for the monies as they are
debts of the insolvent estate of my husband when he dies. He has, through 19
credit cards, a total limit of credit available of £58,000 with some
£18,000 of that limit spent and owing.
If my husband dies first should I just carry on paying his credit card
debts, possibly from some of his cards if i do not have enough coming in the
from the dss pension and income support payments. I also have credit cards in
my name only, as his cards are in his name only, and could possibly pay my
husbands credit cards off (or at least the minimum payment when due) that
way.
We both have very good credit ratings. No ccjs etc.
Any comments would be greatly appreciated, or details of any lawyers. Or
other bodies where we could get good advice
thank you,
Name Mrs V E Date 10th January 2003
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