Bankruptcy is a difficult experience for anyone to go through, but for some if us there is no other alternative. But what exactly are the effects of bankruptcy and how can you recover from it?
Once you have been declared bankrupt, you will lose control of your assets, including your home. This is a serious situation; however, if you live with a spouse and/or children, you are given a twelve month period to make alternative living arrangements. But after twelve months, your property may be put up for sale. Another option is that if you own the property with someone else, they have the option of buying your interest in the property from the Trustee.
Another disadvantage with bankruptcy are the restrictions that will almost certainly be placed on you, not to mention the stigma that goes along with declaring yourself bankrupt.
These restrictions include:
- You cannot obtain credit of £250 or more alone or jointly with another person without disclosing your bankruptcy
- Conduct business in any other name other than that which you have been made bankrupt
- Be involved in promoting, forming or managing a company without the court’s permission
- Hold certain public offices
These constraints, however, will end once the bankrupt order is discharged.
On the other hand, you will be able to open a new bank account or building society account on condition that you disclose your bankruptcy status. The bank or building society will then place their own limitations and conditions. Overdraft facilities and cheque books may also not be obtained.
Not all personal belongings are claimed during bankruptcy. Items that you are allowed to keep include any tools, books, low value cars, items you may need in your employment or business, your clothing, bedding, furniture, and basic household items.
A bankruptcy order usually lasts for twelve months, but this does not necessarily mean that it is automatically discharged. Additionally, discharge may not necessarily free you from certain liabilities.
Even though a discharge releases you from most of the debt you owe, there are certain exceptions, including debt arising from fraud, certain crimes and fines. Debt from damages, personal injury or money owed under family proceedings like maintenance will only be released if the Court agrees.
When you are discharged, there may also be assets that have not been claimed, or that were obtained before discharge. These assets could include property, insurance or pension policy, or an interest in a will or trust fund. These assets are controlled by the Trustee, who can deal with them at any time in the future, which may take years after discharge.
There are also instances where a family member or friend can buy your interest in your property. Your Trustee will be able to give you more information regarding this. You need to disclose any assets that may have been acquired before you were discharged to your Trustee, as these assets could be claimed to pay your creditors. If you claim any assets after your discharge, you are usually allowed to keep it.