A few comments on bankruptcy

Bankruptcy is never going to be the same for everybody, because everyone's circumstances are different. Consequently, use these posts for guidance NOT advice.

The first thing I would suggest you do if bankruptcy has crossed your mind, is seek some professional advice. Your local Citizen's Advice Bureau are probably the best place to start and their advice is free. OK, with many of these places, you do have to go and sit amongst the great unwashed whilst you wait to be seen by a caseworker, but once you've got that initial meeting out of the way, you will work with someone on an appointment basis.

When I first went to my local CAB, it was the first day they were open after the Christmas holiday 2005. I was in employment, but my outgoings had become more than was coming in from my day job salary each month.

Most months I scraped by, having done web desgin for people part time, but this never was going to help me out of the hole I'd dug for myself.

My bank refused to help me survive Christmas by increasing my very small overdraft to cater for a cheque I'd put in just before the holiday, who's funds would not clear until after. This meant that payments for the end of the month would fail, incurring penalties at the bank etc.

The first thing I discussed with my caseworker, was how I would deal with my creditors, the largest of these being the bank who had just withdrawn their support.

Bankruptcy wasn't even discussed. We decided to write to the creditors and make an offer of reduced payments.

The CAB did this for me and the response from the creditors was pretty slow. It was easily the end of February before we'd heard from them all.

Most agreed to accept the amounts proposed except the bank (but it was too late for them to argue by now).

The credit cards agreed to freeze the interest on the outstanding amounts and accept payments that were approximately a third of what they should have been, but for a period of only six months.

In March, fate played a trick on me and the consequences were to put a completely different spin on the proceedings, as I was made redundant from my job.

With no other income but Jobseekers Allowance, I wasn't going to be able to keep to the payment agreements that had been accepted.

I'd spent some time in the previous months, doing research on the internet in case bankruptcy became an option.

I found very little to help me, one of the reasons I started this blog, because I think at least a little objective advice on a situation is better than none at all.

I'd also looked at the IVA which we keep seeing advertised on TV, but in this case not applicable, as you need to be in work to enter into one of those.

One of the reasons I chose bankruptcy, is the fact I have very little in the way of assets. I live in rented accomodation, I drive a 15 year old car and basically the only other thing I have is my PC.

Things you have to consider before going bankrupt include:

Your future credit rating will be in minus figures and will remain so for 6 years. I was told that some finance companies will deal with discharged bankrupts and the interest loading is 1 to 2% over the general odds you find in the market place.

You cannot be a director or treasurer of a company or "club" whilst you are bankrupt. If you can get it, any credit you try to obtain over £ 500 you must declare your bankruptcy status.

You cannot become an MP whilst bankrupt.

If you own property or have any "considerable" assets such as a new luxury car, you could lose it ( it can be sold to help pay some of your debts to your creditors).

Bankruptcy is not free. Currently in 2006 the charges are :

£ 150 court fee £ 325.00 Official Receivers fee. In certain cases you can get the £ 150 fee back from the court (in the case of unemployment for example). Telephone your local county court and ask for the leaflet on court fees. It contains the form you have to fill in to get the fee back.

Under any circumstances, you will have to pay both the fees on the day and in cash too ! The Official Receivers fee is non - negotiable

If you've made your mind up that bankruptcy is the course to follow, telephone your local county court and aske them to send you the forms pertaining to personal bankruptcy.

They are pretty weighty adding up to 12 or 13 sections and a bankruptcy petition, all in duplicate.

You can get help and advice filling in these forms from the Citizen's Advice Bureau, especially where the petition is concerned, as this is a legal document and therefore needs to be letter perfect.

The other forms are for your personal details and your assets. Again, you may need to seek advice. As well as property, savings etc, this is where you should declare other items of value, which the Official Receiver could consider valuable enough to order them sold to contribute to your indebtedness.

In my case, I declared my car and my PC. Neither were considered valuable enough to make any significant contribution to clearing my debts and so I was allowed to keep them. It was also discussed with the Official Receiver that both these items are used as tools in my job hunting activities.

You'll notice that there's a lot more mention of the Official Receiver in these notes, than the court and there's a very good reason for that.

Your dealings with the court will last a day or less. You will be given an appointment, you will turn up with all your forms completed, you will pay your fees.

After your forms have been given the once over, you will appear in front of the judge, who will decide whether your bankruptcy is appropriate.

He will look over your statement of affairs and will almost certainly ask you questions on how you decided to take this course of action and how you think you got into such a state of affairs in the first place. The questions are more to establish that you understand the importance of what you are doing, rather than ascertain your life history.

If your bankruptcy is agreed, you will be issued with your bankruptcy notice.

This is pretty much where the court's involvement with you ends. You will of course remain on record at the court as a bankrupt, but from the day of your bankruptcy onwards, your bankruptcy will be handled by the Official Receiver's office.

These days, because of the sheer numbers of personal bankruptcies, the once face to face interview with the Official Receiver, is now carried out on the telephone (in most cases).

Depending on the location of their office, the norm is for the court to fax over the pages of your financial statement and then telephone their office, where your initial interview will begin.

This is just to verify all the details in the statement are clear). A second appointment will be agreed again by telephone (where a senior official will go through your statement with a fine tooth comb). More about that in another posting.

Once your initial telephone interview is over, that is it for your day in court. You are free to go.

Freezing of bank accounts.

Neither the court or the Official Receiver has the power to freeze your bank account. Banks do this at their own discretion and in some cases will try to give you the impression they are doing so on the instructions of the Official Receiver.