Bankruptcy Implications and Effects

Despite recent changes in law, there are still very serious consequences arising from becoming bankrupt:

• You must tell your bankruptcy trustee about assets and increases in income you obtain during your bankruptcy, including lump sums like redundancy payments, or money left to you in a will.
• You must stop using your bank accounts and credit card, and you cannot obtain credit of more than £500 without first disclosing the fact that you are bankrupt.
• You may have to go to court and explain why you are in debt. If you do not co-operate, you could be arrested.
• When your trustee makes a payment to your creditors, they may place an advertisement about your bankruptcy in a newspaper asking creditors to submit their claims. This advertisement may appear several years after the bankruptcy order.
• The Official Receiver/trustee will take control of all your other assets. They will dispose of them and use the money to pay the bankruptcy expenses and your creditors.
• Your interest in your home will be dealt with by your trustee. The home may have to be sold to go towards paying your debts.
• If you are self-employed, your business is normally closed down and any employees are dismissed. You cannot act as a company director, without the court's permission.
• Your trustee may apply to the court for an income payments order (IPO), which requires you to make contributions from your income for three years. IPO payments will continue after you have been discharged from your bankruptcy.
• You may not hold certain public offices. You may not hold office as a trustee of a charity or a pension fund.
• Your bankruptcy will remain on your credit file for six years. You may have to declare that you have been bankrupt if applying for credit at any time in the future.
• The emotional cost of a bankruptcy can be high, in terms of embarrassment and distress.