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What is bankruptcy?

Bankruptcy is one way of dealing with debts you cannot pay. The bankruptcy proceedings will 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. Anyone can go bankrupt, including individual members of a partnership.

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).

Bankruptcy petitions are usually presented at a county court near to where you trade or live or at the High Court in London.

What happens to my 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. The Official Receiver or any insolvency practitioner who is appointed as trustee will take control of all your other assets on the making of the bankruptcy order. He will dispose of them and use the money to pay the fees, costs and expenses of the bankruptcy and then your creditors.

What happens to my 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.

If your husband, wife or children are living with you, it may be possible for the sale in the bankruptcy to be put off until after the end of the first year of your bankruptcy. This gives time for other housing arrangements to be made. Your husband, wife, partner, a relative or friend may be able to buy your interest in your home from the trustee. Such a purchase would prevent a sale of the property by the trustee at a future date. Your spouse or any other interested party should be encouraged to take legal advice about the home as soon as possible.

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The legal provision of bankruptcy, though sometimes misused, is a progressive and often merciful process. By it, a hopelessly indebted individual can make an official declaration of financial inability and be free of obligation. This may be on a temporary or permanent basis, depending on the degree of insolvency.

With new amendments in US laws, there is little or no social or corporate stigma attached to filing for bankruptcy. Filing for bankruptcy, though a matter of public record, no longer means that it becomes a matter of public knowledge. Effectively, this is an incentive for the bankrupt party to make another attempt at financial solvency. An individual can file for bankruptcy under Chapter 7(for irreversible insolvency) or Chapter 13(for temporary insolvency).

The benefits of filing for bankruptcy include restoration of bank credit via a secured credit card. This requires a certain deposit to be made, but a new line of credit can be established within two years of doing so. Meanwhile, the bankrupt person has assured freedom from harassment by previous creditors.

The US Congress amended the US bankruptcy code(ratified in 1978) in 2005, and further amendments were made on October 17, 2005, to discourage the abuse of the generous provisions available. In fact, the passing of these amendments was preceded by a literal stampede on bankruptcy courts by people hoping to beat their enactment.

Under the revised Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, (BAPCPA), someone filing for bankruptcy is subjected to stringent tests to establish genuine insolvency and present income. Another provision is that people dwelling in any particular state, must be residents of that state for at least two years to be eligible. Bankruptcy laws do not provide a shelter against alimony and child support obligations.

Bankruptcy provides detailed information about bankruptcy, bankruptcy attorneys, bankruptcy faqs, and more. Bankruptcy is affiliated with New Bankruptcy Laws.

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