Bankruptcy – Important Information
Information and considerations to be taken into account about Bankruptcy
Impact on credit rating
The bankruptcy order would show on your credit report for a minimum of six years from the date of bankruptcy order.
While bankrupt you must disclose this status when applying for credit or £500 or more, including ordering goods on credit.
Even after your bankruptcy has been discharged, organisations might refuse to give you credit or other financial services simply because you have been bankrupt in the past.
If you do manage to find someone who will lend to you, it is possible they may charge you a higher interest rate as they will see you as a high-risk customer.
Some mortgage lenders will ask if you have ever been bankrupt, so your bankruptcy could affect your creditworthiness long after the information has been removed from your credit report.
Your Bankruptcy would be a matter of public record. It is entered in the Individual Insolvency Register and is advertised in The Gazette – the official Government publication for public notices.
As a condition of a new job or tenancy or any type of vetting, you may have to let an employer or landlord view the ‘public’ information on your credit report, such as court judgments and bankruptcy orders.
Payments from Income
Subject to affordability – you may be required to make payments from income for 36 months in total towards the bankruptcy.
How long bankruptcy lasts
In most cases you will cease to be bankrupt, referred to as being ‘discharged’, after a maximum of 12 months.
However, the discharge can be extended (potentially up to 15 years) if you fail to cooperate in the bankruptcy proceedings or are deemed to have acted in a dishonest or blameworthy way.
Joint Debts in Bankruptcy.
A joint debt is where two or more parties are named on the credit agreement. If any of your debts are in joint names with someone else who isn’t bankrupt, the debts won’t be written off, but you won’t have to pay them.
This means any joint debts would become debts in the other person’s name only and they’d be responsible for paying off the remaining amount of the debt in full.
Debts excluded from bankruptcy
The following debts are not cleared by bankruptcy.
- Child maintenance arrears, if the arrangement was set by the CSA or Child Maintenance Service.
- Criminal fines, compensation orders and victim surcharges from a magistrates’ court or Crown Court.
- Debts you take out after the date of your bankruptcy order.
- Debts taken out fraudulently, for example benefit fraud.
- Mortgages and other debts secured against your home, if you want to keep the house.
- Social Fund loans.
- Student loans.
- TV Licence arrears.
- Court orders telling you to pay compensation to someone for personal injury.
- Payments ordered by a court as part of family proceedings, for example in divorce cases.
Apart from a few other rare exceptions, all other debts will be written off by bankruptcy.
Loss Of Assets
You can lose assets of value including your home or your share in it if jointly owned.
Anything of worth which can easily by sold to raise money to pay into the bankruptcy could be taken from you.
Impact On Business Affairs
Any business you solely own will very likely be closed down or an assessment made as to whether it could be sold to raise funds to pay into the bankruptcy.
You may not be, or act as, the director of a limited company or be directly or indirectly involved in the formation, running and management of a limited company – without the permission of the court.
If you are self-employed you will be able to continue to trade but subject to certain restrictions.
Impact On Employment
In some jobs, a record of bankruptcy may lead to dismissal, demotion or other issues.
Your employer or any potential employer may be unwilling to employ someone who has been bankrupt in a role of responsibility involving finance or the handling of money. Some professional membership bodies don’t allow undischarged bankrupts to remain members.