Bankruptcy Questions and Answers Submitted on 28.12.2010

Q. If I go bankrupt I will be blacklisted

A. There is no such thing as a blacklist. If you are in a position where you need to go bankrupt your credit rating will already be affected. Remember your credit rating is only your ability to get more credit and that is probably the last thing on your mind. You can still open a new bank account and obtain a debit card to make purchases in shops.

Q. Will I get the sack?

A. Most employers will not be concerned about your bankruptcy as long as you don’t let it affect your day to day job. Your employer will not automatically find out unless you are subject to an Income payment order (not Income payment agreement). There are some professions that are affected such as civil service, police, banking staff etc. If you are concerned about your employment it is advisable to speak to your HR department or your manager.

Q. Will all my friends and family find out?

A. Your name and address is listed on the Insolvency register online. It is no longer published in your local paper unless you are self employed. It is unlikely your friends or family will find out unless you tell them yourself.

Q. Will my bankruptcy last for 5 years?

A. Bankruptcy usually last for one year. This is called discharge from bankruptcy and its restrictions. If you are under a restriction order or undertaking this may last for upto 15 years. Bankruptcy means you are protected from your creditors. This means you can stop paying them. Your creditors will have to stop letters, phone calls and write off the debt.

Q. Do I have to pay my debt back?

A. Your income and expenditure will be assessed to see if you have any disposable income. If you have a surplus you may have to repay this for a period of upto 3 years. You will only have to pay this for a maximum period of 3 years. Your debt however is written off immediately upon the making of your bankruptcy order at court.

Q. I am self employed and do not want to lose my business

A. If you are a sole trader you will be able to continue trading as long you do not change your trading name. You will have to make sure you keep your tax affairs up to date. If you are a director of a company you will have to resign whilst you are an undischarged bankrupt.

Q. Will I lose my car?

A. Your car will be safe as long as it is used for work or you can show it is essential for day to day use. If it is deemed excessive in value then you will be asked to sell the car and downgrade.

Q. Will I lose my home?

A. If you rent your own home then it is upto your landlord, but it is unlikely you will be evicted as long as your rent is up to date. If you are a homeowner will very little or no equity then it is unlikely you will lose your home. If you are behind on your mortgage and other loans secured on your property there is a risk of repossession. There is also an option to buy back the equity in your property for £1.

Q. Will a bailiff visit my home and take my belongings?

A. You need to declare all your assets. You will not have a bailiff visit if you are being honest about your assets. Certain household items are automatically exempt such as clothing, bedding, furniture and any work tools.

Q. Can I be put in prison?

A. Bankruptcy is not a criminal offence and you cannot be put in prison for seeking the protection of the court under Bankruptcy law. It is however illegal to continue to take out credit whilst bankrupt.