Advice on Bankruptcy

Bankruptcy is an option that often has to be considered when an individual cannot pay their debts as they fall due. For a first time bankruptcy within a 15 year period, for debts under £20,000, the procedure is known as a Summary Administration and you may be discharged after two years. A first time bankrupt with debts over £20,000 may be discharged after three years.

If you want to make yourself bankrupt, you should contact a county court (unless you live or have traded in London, then you should contact the High Court). The address and telephone number of your local county court is listed under “Courts” in the telephone book: references here are to civil courts - the county courts - not magistrates’ courts. Staff at the county court will tell you the name, address and telephone number of the county court where you should present your petition.

You will normally have to pay £120 as a court fee but in certain circumstances (for example, if you are on income support), the court may not ask you to pay this fee. However, you will have to pay £250 towards the cost of the administration of your bankruptcy by the Official Receiver.

Although bankruptcy has a bad stigma and is publicly advertised, it should always be considered when dealing with individual insolvency cases.

Advice on Debt Management Programmes

The first step in an Debt Management is to work out how much you can afford to pay your creditors each month after you have paid for essential living costs. An income and expenditure list should be drawn up to see how much money you have left at the end of every month. (ie your surplus income).

If you know that you cannot pay all your debts, you could consider writing to your individual creditors to see if you can reach some compromise. Include a timetable of when you will repay them. The disadvantage with an informal arrangement is that it is not legally binding, so your creditors could ignore it later and want you to pay in full.

Advice on Trust Deeds (Scotland Only)

A trust deed is a formal arrangement with your creditors, used in Scotland where a debtor grants a deed in favour of the trustee which transfers their assets tothe trustee for the benefit of creditors.

Provided certain conditions are met, the Trust Deed may be registered as "protected", thereby preventing creditors from petitioning for the debtor's sequestration or taking any other steps to recover debts due to them. Financial and personal circumstances vary, so the consequences of signing a Trust Deed will be different for each individual or partnership.

The advantages of a trust deed are that it takes the pressure off as all correspondence and the Trustee deals with queries from creditors. It puts the debtor rather than creditors in control of the debtor's financial situation and reduces the costs - a trust Deed is usually more flexible and less costly to administer than sequestration and allows the debtor the right to fulfil certain public offices - which would not be the case with sequestration.