| Product: |
Bankruptcy - friend of foe? |
| Date: |
03/03/08 (735 review reads) |
| Rating: |
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Advantages: fresh start, no more overwhelming debts
Disadvantages: financial restraints, bad credit rating, possibility of losing all assets incl house, embarrassing
This account only covers personal bankruptcy. I do not know anything about business bankruptcy and will not be able to comment on it.
A couple of years ago everything in my life was on the up. I had a great job with a brilliant take home pay, a car and was going on holiday a couple of times a year. Then things changed. I was made redundant due to restructuring in the company and my position was suddenly not there any more. I had not been with the company long so I wasn't eligible for redundancy pay. Suddenly there was no job, no regular income. But I still had to pay rent, credit cards bills, loan repayments and so on. Finding work was harder than I thought and it took much longer. I had to apply for benefits. There came a point when my savings were gone and no money was left to pay off the loan and credit cards.
The Citizens Advice Bureau (CAB) helped me as far as they could. Every time I mentioned the bankruptcy word they were dead against it. They advised me that I should try without going bankrupt. In a way it was a relief. I couldn't afford to file for bankruptcy. Even on benefits I still had to find £350.00 to pay to the court. On benefits, you won't need to pay the court cost of £130.00. I was barely surviving on the money I had, there wasn't a penny spare.
Eventually I found new work. But even then, my take home pay was covering the basics but there was no money left to pay off the money I owed. So after a lot of soul searching I decided that bankruptcy was the last but also only option for me.
The paperwork:
Once you have decided you want to make yourself bankrupt you have two options. You can fill in the forms by hand or online at https://www.insolvencydirect.gov.uk/isolv/ . A number of different forms are available and once you signed up you can access the petitions and start filling them in.
I had started filling in the forms online a year before I eventually went to court. I preferred the online version, it allows you to add bits as they come to light, change when there are changes, and best of all, you can print the three copies off (either single of double sided) without having to write everything out in triplicate. And you need everything in triplicate so, if you have a computer an printer, filling in the petition online and then printing it off may be the simplest solution.
The forms have to be filled in to the best of your knowledge, list your name, address, occupation, employer, tax code, all your creditors with approximate amounts you owe them and answer some basic questions about gambling and to finish it off, you have to explain why you think you got yourself into the situation (just saying it's due to the recession will not do).
After you filled in the forms or printed them off in triplicate you are asked to call your nearest country court that deals with bankruptcies. Not all County Courts do so it's best to check out which one is the closest to you. If you call the wrong one I'm sure the people there will be able to find you the one that's closest to you.
While you can fill in the forms by hand and leave them until you find time and money to file for bankruptcy. However, once you complete the online form and pressed the 'send' button you are asked to call the court within two weeks and make an appointment for the hearing. The forms you filled in online won't be available to anyone until after your bankruptcy order has been made and then only the official receiver will be able to access the information.
Calling the County Court for an appointment for the bankruptcy petition hearing:
I called my local county court on a Tuesday afternoon. I had looked up the address of the nearest one online at http://www.insolvency.gov.uk/ and when the call was eventually answered I was offered a choice of two County Courts, the one I had contacted (and only one dealing with bankruptcy) or the County Court in another town about the same distance away that was helping out the actual county court I had to go to, to make sure there wasn't too much of a delay. When I enquired about the earliest appointment I was told that I had to wait a few weeks with the court I had contacted but if I opted for the other court, the one that was helping out, I could be seen on the Friday, only three days later. I was very surprised. I asked if there was a day in the week after that, three days was a bit too fast, in particular when I was waiting for my wages to paid into my account so I could actually afford the bankruptcy. I was given a date and time (10am) a week later.
Preparations:
You should be prepared before you declare yourself bankrupt. Once you are declared bankrupt you have to stop using your bank account and all credit cards (if you have any). I made sure I paid all utilities and rent before I went to court and cleaned out my bank account of any money apart from just under £30.00. Even if the official receivers allow you to keep your account, banks normally freeze the account as soon as they learn of the bankruptcy. It's best to be prepared. I had also done a big shop and got all the essentials in to make sure I would survive until the end of the month when my next paycheque was due.
The day at the court:
I arrived early, not wanting to make a bad impression with the money for the bankruptcy in my pocket. You should take the money in cash, I don't think you can actually pay by credit or debit card, well I was told I couldn't.
I was seen after a 10 minute delay. There was no checking of ID (I had brought my passport and photo driver's license just in case) and after checking that I had all the paperwork in triplicate the court official and I went through the first pages together, deleting and signing pages as we went along. Then it came to signing the affidavit. Normally you have the bible (or whatever holy book relates to your religion) in the room and swear on it. But the court official didn't want to make assumptions and didn't bring anything in with her. She told me that a solemn promise was enough (reserved for agnostics and atheists or anyone uneasy swearing on the bible or any other holy book - but I did wonder if those claiming to be 'Jedi' would have to swear on a box set of Star Wars movies). One of the copies of the petition was returned to me as my own copy for reference.
At this point I was taken to the payment window where paid the £485.00 needed to file for bankruptcy. I advise anyone going through with a personal bankruptcy to actually check with the court if you are not eligible for reduced court fees. While I was not on benefits any longer which would have qualified me for reduced or no court fees, anyone else can apply by putting in for means testing. I didn't know about it but the court official gave me a brochure and application form and as long as you can prove your income, you might be eligible for money back on the court fees (though not the rest of the charges.) I put in for means testing (sending my tenancy agreement, receipt of money paid for bankruptcy and three pay slips) and after a few weeks received a cheque with part of the court charges back.
I was then taken up to the waiting room to see the judge. There was a short delay but I was called in to see the judge who would decide on my future. That was the moment when I started to get nervous. The judge asked me a number of questions. He wanted to know if I was aware of the long term implication of a bankruptcy and whether or not I was prepared to follow through with it. After that he went thought my statement of affairs, asking me a number of questions relating to who I was, checked that what I declared in my petition tallied up with what I was telling him in person. The last question was about the reason why I felt I had got myself into debt that bankruptcy was the only way out. I explained my situation and after a brief moment the judge declared that he was satisfied with what he has read and heard from me and declared me bankrupt.
At that moment I burst into tears. All the stress and tension from the past 18 months suddenly lifted and although I had promised myself I would be strong, tears started flowing and I couldn't stop it. The judge looked up from his paperwork, told me that the situation could prove overwhelming and handed me a box of tissues.
All that was left after that was to sit in the same room I had been in before when I had to sign the affidavit and talk to the official receivers. Normally you go and see them directly after the court date but as I had decided to take up the offer of going to a county court nearer to me that was helping out, I had to speak to them on the phone. They asked me a few basic questions, if I owned or rented the place I was living in, if I had a car and what kind of bank account I had (and if that was the account my wages were paid into). After that I was free to leave.
Interview with the official receiver/trustee:
A couple of weeks after I was declare bankrupt I received a big package in the post with brochures and a letter I needed to sign, bank and credit card statement I had to send them together with wage slips and all credit and bank cards (cut up). I sent all information I thought was needed, probably returned more papers that I needed but I wanted to thorough. I was given a day and time when the official receiver was going to call my home for the interview. I had to take some time off work to be in but it beat having to appear at the official receiver's offices.
Within minutes of the time I was given the call came and we went through the do's and don'ts of a bankruptcy. All the information is available online so I won't actually list everything. Most of the items had nothing to do with me anyway. I was not a company director or held some sort of office. The only thing that was of interest for me was that I had to declare I was an undischarged bankrupt before opening bank accounts or applying for credit (you are allowed up to £500.00 of credit as long as you declare you are bankrupt). I was also told that a bankruptcy normally lasts for 12 months from the date of the bankruptcy and you get automatically discharged on the anniversary of your bankruptcy unless you don't comply with the receivers. I was also told that I had to tell the truth about my situation and refusal would be an offence in the eyes of the law.
After the introduction the woman who called me and I went through every bit of the petition again. We discussed in detail where the money went, how I got myself into the situation and everything that lead up to the decision of filing for bankruptcy.
While the person I spoke to was a faceless official, she was kind, caring and offered a lot of help and information.
Towards the end of the interview - it takes anything from 30 to 60 minutes - she told me that she could not understand why the CAB didn't push me into bankruptcy earlier. She told me that it really was the only option and I could have been discharged already if they had advised me properly - plus I wouldn't have had all the stress and worry for an extra year. I was very surprised when I heard this, I thought people were discouraged from filing for bankruptcy and to hear that someone supported my initial thoughts was interesting.
While the interview is a little nerve racking, it's nothing to fear, after all, you put all the information down before and all you need to do is confirm that you were not reckless with the money and did everything to avoid bankruptcy.
I was told that, as I had no car, no house and no assets, my bankruptcy was fairly easy to deal with. There shouldn't be a problem at all to start proceedings for early discharge from bankruptcy after 6 months so that, if all goes well, I could be discharged in as little as 9 months. I was also told that the official receiver's didn't have a problem with me continuing to use my current (basic) bank account and they would write to the bank in question suggesting that they kept me on as a customer. (Of course, they told me that after I had cut up my cash card and sent it to them in the envelope with all the paperwork.)
Life as an undischarged bankrupt
Has my life changed since filing for bankruptcy? No, not really. For more than a year before I filed for bankruptcy I had been living on benefits and then my monthly wages. I didn't have credit or debit cards, only a cash card with my basic bank account. I couldn't spend money I didn't have.
For a little while I got letters and calls from banks and credit card companies requesting immediate payment of debts or they would take me to court. I gave them them the bankruptcy order number and they went away. I have not been bothered by anyone for a while. It makes a nice change, in particular when you are used to almost daily calls from your bank requesting payment.
After sending the cut up cash card to the receivers I was told that they didn't object to me using the account. I had to go to my bank and request a new card. Not only did I get a new card, I was given a debit card for my basic account, something I didn't have before. Now I can pay in supermarkets and online and don't need to withdraw cash from the machine first or ask a friend to borrow their credit or debit card.
I had prepared to open a new bank account. Not a lot of banks are willing to take on an undischarched bankrupt (and you have to declare it before you open the account) but with my bank not freezing my account and allowing me to use it as before, I am not really in the market for change.
My name and address was published in the local paper as well as online in the bankruptcy register where it will stay for up to three months after my discharge. I wasn't too bothered about the local paper. Hardly anyone here knows me and the people who should know I told myself.
I had used some of the money I should have used to pay my council tax bill to pay for my bankruptcy. While I as trying to get the money to catch up with council tax payments, I got a summons from my local authority. They wanted all the council tax and they wanted it straight away. I sent them a letter explaining about my situation and within a couple of days I had an email back asking me for a copy of the bankruptcy order and the council was simply writing off what I owed them until the day of the order. I got a new council tax account number and I am now paying my council tax by direct debit to show that I appreciate their good will gesture. Otherwise it would have gone into the bankruptcy pot with all the other people I owed money to.
I was given a new tax code by the Tax people. For a number of months my tax code changed to NT (No Tax) and I received my wages in full without deduction. When that happens you are not allowed to keep this extra money. It goes to the official receivers and they will share it amongst your creditors.
I don't really notice much of a difference in my life. It has much to do with the fact that I had learned to live on benefits and my wages for more than a year and learned not to spend money I didn't have on items I neither needed nor could afford.
I am much more careful with my money knowing I have no credit anywhere and can only spend the money that is in my account. I have learned to appreciate the value of money. Bankruptcy has taught me a valuable lesson and I will not make the same mistakes again.
I may have no credit rating at all at the moment and for the foreseeable future. But this suits me just fine. I get on with my daily life and don't need to worry about overspending. If I don't have the money I can't buy it. At the end of my first month of the bankruptcy I was left with 90 pence in my purse for a week. I was desperate for my wages to be paid into my account so that I could go shopping. I survived and it told me that you could survive without spending unnecessary money if you budget properly.
It may be easier for me to live as an undischarged bankrupt. I don't have dependants, house, car or assets. Anyone who has all those things I just mentioned should think long and hard before filing for bankruptcy. You may be losing more than you bargained for as your house will become part of your assets as will your car.
Celebrities are filing for bankruptcy, making it seem easy and something you can get in and out of without problems or stigma. I think it is dangerous thinking that bankruptcy is no big deal. While you stand to gain a lot (well, at least get back to zero with all your debts being written off), you could also lose your home, friends and family if they don't' understand what has happened.
Early Discharge Procedure:
Normall bankruptcy lasts for 12 months and you will be discharged automatically on the anniversary of your bankruptcy order. When the investigation into the reason of your bankruptcy is concluded and all (possible) payments to creditors were made, and the official receiver concludes that there's nothing gained by keeping your file on their desks, they can file for early discharge of bankrupty.
I got a letter a while back asking me to update them on my financial situation, even if nothing has changed, you still have to reply to them. But the letter also clearly states that you should not bug them and call them if and when the discharge will happen.
They then send a letter to all your creditors telling them of the intention of filing for early discharge and the creditors then have 28 days to object. If they don't then your case is closed and the official receiver applies to court for early discharge. In most cases, it is only a formality and before you know it, you get a letter .
I received my early discharge letter recently. All in all, my bankruptcy lasted just over 6 months from the day I filed my petition. I am so glad it is now all over.
For everyone reading this and hoping for early discharge, just remember: Early discharge is not a right, it is a privilege!
If you are granted early discharge, take it as a good sign and count your blessings, after all, it's all down to how you behave during your bankruptcy and how honest you were during the interview stage. If they feel that you were not honest, they can make your bankruptcy even longer by suspending release.
I was given a chance for a fresh start. I am going to make the most of it. And who knows, maybe soon I will be able to save enough money to be able to afford a small car. That's what I'm saving up for. It might take me a lot longer than it would have done a few years ago when I would have walked into a dealership and asked for hire purchase but I have learned my lesson.
For me bankruptcy was the way to go. I am rid of the debts that were making my life a living hell. It may not be the best solution for everyone. But I learned a lesson I will never forget.
Summary: Last way out of a way one street into financial ruin
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