Bankruptcy is a result of a bankruptcy order being issued by the Court on a petition applied for by the individual or a creditor who is owed more than £5,000.
The individual’s assets will be realised and the proceeds distributed to creditors by the Trustee in Bankruptcy. The Trustee will originally be the Official Receiver but the case may be passed onto a Licensed Insolvency Practitioner.
Once the bankruptcy order has been made the bankrupt loses any rights to property and assets, subject to certain exceptions. The exceptions are pension rights, any tools and equipment needed for business use and basic domestic possessions such as clothes, bedding and furniture.
A bankrupt is allowed to work and earn a living but may be required to make payments out of surplus income for a period of up to three years, known as an Income Payment Order.
A bankrupt is subject to certain restrictions:
- may not obtain credit of more than £500 from anyone without telling them you are bankrupt.
- must not carry on business under a name different to that you were made bankrupt without first disclosing the fact that you are bankrupt.
- must not act as a company director without the Court’s consent.
- May not work as an Insolvency Practitioner
These restrictions are usually automatically lifted once the bankrupt is discharged, which is usually automatic after 12 months. However, in certain circumstances the Official Receiver can apply to Court for a Bankruptcy Restriction Order, or the bankrupt agrees to sign a Bankruptcy Restriction Undertaking, which extends these restrictions for a period of up to 15 years.
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