Filing for Personal Bankruptcy in the UK

Personal bankruptcy is the process of freeing yourself from overwhelming debts so you can make a fresh start, subject to some restrictions; and selling your high value assets so money can be shared out fairly among the people who money is owed to. Anyone can go file for personal bankruptcy, including individual members of a partnership.

Please that personal bankruptcy is a serious matter. A person who files for personal bankruptcy will have to give up any possessions of value and the beneficial interest in their home (sales value less outstanding mortgage).

• Who can file for personal bankruptcy?
• How to you file for personal bankruptcy?
• Where is a personal bankruptcy order made?
• What happens to your home under personal bankruptcy?

How to you file for personal bankruptcy?

A court makes a bankruptcy order only after a bankruptcy petition has been presented. It is usually presented either:

• by yourself (debtor’s petition); or
• by one or more creditors who are owed at least £750 by you and that amount is unsecured (creditor’s petition).

A personal bankruptcy order can still be made even if you refuse to acknowledge the proceedings or refuse to agree to them. You should therefore co-operate fully once the personal bankruptcy proceedings have begun. If you dispute the creditor’s claim, you should try and reach a settlement before the personal bankruptcy petition is due to be heard. Trying to do so after the personal bankruptcy order has been made is both difficult and expensive.

Where is a personal bankruptcy order made?

Personal bankruptcy petitions are usually presented at the High Court in London or at a county court near to where you trade or live. A petition can be presented against you even if you are not present in England or Wales at that time. This can happen when you normally live in, or within the previous 3 years have had residential or business connections with, England or Wales.

Sometimes government departments start personal bankruptcy proceedings in the High Court in London or in one of the District Registries. If you did not trade or do not live in the London area, your case will usually be transferred to the appropriate local county court and, if a bankruptcy order is made, it will be dealt with by the local Official Receiver.

Once the personal bankruptcy order has been made, it is advertised in “The London Gazette” (an official publication which contains legal notices) and in a local or national newspaper (or both). In addition the Official Receiver will give written notice of the order to a number of organisations.

What happens to your assets under personal bankruptcy?

• You will no longer control your assets.
• You can keep the following items unless their individual value is more than the cost of a reasonable replacement:
• tools, books, vehicles and other items of equipment which you need to use personally in your employment, business or vocation; 
• clothing, bedding, furniture, household equipment and other basic items you and your family need in the home. 
• All these items must be disclosed to the Official Receiver who will then decide whether you can can keep them.

The Official Receiver/trustee will take control of all your other assets on the making of the bankruptcy order. He or she, or any insolvency practitioner who is appointed as trustee, will dispose of them and use the money to pay the fees, costs and expenses of the bankruptcy and then your creditors.

If appointed, the insolvency practitioner’s fees for acting a trustee are also paid from the money raised by selling your assets.

• The trustee may apply to the court for an order restoring property to him or her if you disposed of it in a way which was unfair to your creditors (for example, if before personal bankruptcy you had transferred property to a relative for less than its worth). The trustee may claim property which you obtain or which passes to you (for example, under a will) while you are bankrupt.
• A student loan made before or after the start of a student's bankruptcy is not regarded as an asset that the trustee may claim, if a balance of the loan remains payable.
• If you have made a claim against another person through court proceedings, or you think you may have a claim (a right of action) against another person, the claim may be an asset in the bankruptcy.

What happens to your home under personal bankruptcy?
If you own your home, whether freehold or leasehold, solely or jointly, mortgaged or otherwise, your interest in the home will form part of your estate which will be dealt with by your trustee. The home may have to be sold to go towards paying your debts.

If your husband, wife or children are living with you, it may be possible for the sale in the bankruptcy to be put off until after the end of the first year of your personal bankruptcy. This gives time for other housing arrangements to be made. Your husband, wife, partner, a relative or friend may be able to buy your interest in your home from the trustee. This may be so even if that interest is very small, worth nothing or you owe more on the house than it is currently worth. Such a purchase would prevent a sale of the property by the trustee at a future date. Your spouse or any other interested party should be encouraged to take legal advice about the home as soon as possible.

If the trustee cannot, for the time being, sell your home, he or she may obtain a charging order on your interest in it, but only if that interest is worth more than £1,000. If a charging order is obtained, your interest in the property will be returned to you, but the legal charge over your interest will remain. The amount covered by the legal charge will be the total value of your interest in the property and this sum must be paid from your share of the proceeds when you sell the property.

Until your interest in the home is sold, or until the trustee obtains a charging order over it, that interest will continue to belong to the trustee but only for a certain period, usually 3 years, and will include any increase in its value. Therefore, the benefit of any increase in value will go to the trustee to pay your debts, even if the home is sold some time after you have been discharged from bankruptcy: the increase in the value will not be yours.

If, after a certain time, usually 3 years, your trustee has not sold or obtained a charge over your interest in the property, or applied for an order of possession or obtained a charging order against the property, or you have not come to any arrangement with your trustee about that interest, it may be returned to you.

If you wish to discuss a getting personal bankruptcy please call freephone 0800 074 6918. The UK Insolvency Helpline is able to offer help via telephone or online.

What is bankruptcy? | Bankruptcy explained | The bankruptcy process | The effects of bankruptcy | The disadvantages of bankruptcy | How do I petition for my own bankruptcy? | What happens after bankruptcy? | What are the alternatives to bankruptcy?| Can my bankruptcy be reversed? | Can my bankruptcy be cancelled? | New legislation - the Enterprise Act 2002? | Frequently asked questions | Bankruptcy additional facts | UK Personal Bankuptcy | Bankruptcy Records | Bankruptcy Advice | What happens when you visit the Official Receiver's Office? | What happens to my home in bankruptcy? | What happens to my pension in bankruptcy? | When will my bankruptcy end? | How am I made Bankrupt? | Where is the Bankruptcy Order made? | Who will deal with my bankruptcy? | Who do I need to tell if I go bankrupt? | What are your duties as a bankrupt? | What effect will Bankruptcy have on your credit rating? | Payment to your creditors in Bankruptcy | What happens to your assets in bankruptcy? | What is a bankruptcy restriction notice? | What is a form J restriction? | What happens in bankruptcy if I rent my house? | What happens to your life assurance policy in bankruptcy? | What happens to your business in bankruptcy? | What happens to your wages in bankruptcy? | What are bankruptcy restrictions orders and undertaking? | Debts you have incurred after you have been made Bankrupt | What are the advantages of going Bankrupt? | What are the disadvantages of going Bankrupt? | What are the implications of  Bankruptcy? | Jersey - a guide to Bankruptcy Law | Bankruptcy Law | Student Loans and Bankruptcy | Bankruptcy Forms | Avoid Bankruptcy | Business Bankruptcy | Accountant in Bankruptcy | Bankruptcy Lawyers | Bankruptcy Search | Bankruptcy in the UK | Declaring Bankruptcy | Filing for Bankruptcy | How to go Bankrupt | Insolvency Practitioners | Voluntary Bankruptcy | How do I avoid Bankruptcy? | Consequences of Bankruptcy | Borrowing after Bankruptcy | Bankruptcy and Student Loans | Annulling the Bankruptcy | Bankruptcy - The Court | Bankruptcy Bank Accounts | Debt Resolution Forum | Mortgage after Bankruptcy | Personal Bankuptcy