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Chapter Six: Chapter Six: Bankruptcy Bankruptcy 1 1

Chapter Six: Bankruptcy

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Chapter Six: Bankruptcy. Bankruptcy is “ a legally declared inability or impairment of ability of an individual or organisations to pay their creditors .” - PowerPoint PPT Presentation

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Chapter Six: Chapter Six: BankruptcyBankruptcy

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Bankruptcy is Bankruptcy is ““a legally declared a legally declared inabilityinability or or impairment of ability of an individual or impairment of ability of an individual or organisationsorganisations to pay their creditors to pay their creditors.” .” Involuntary BankruptcyInvoluntary Bankruptcy: Creditors may file a : Creditors may file a bankruptcy petition against a debtor in an bankruptcy petition against a debtor in an effort to recoup a portion of what they are effort to recoup a portion of what they are owed. owed. Voluntary BankruptcyVoluntary Bankruptcy: In the majority of : In the majority of cases bankruptcy is initiated by the debtor cases bankruptcy is initiated by the debtor (that is filed by the bankrupt individual or (that is filed by the bankrupt individual or organisationorganisation).).

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Bankruptcy LawBankruptcy Law::Bankruptcy lawBankruptcy law “provides a plan that allows a “provides a plan that allows a debtor, who is unable to pay his creditors, to debtor, who is unable to pay his creditors, to resolve his debtsresolve his debts through the division of his through the division of his assets among his creditors.” assets among his creditors.” This supervised division allows the interests of This supervised division allows the interests of all creditors to be treated with some measure of all creditors to be treated with some measure of equalityequality. . Certain bankruptcy proceedings allow a debtor to Certain bankruptcy proceedings allow a debtor to stay in businessstay in business and use revenue generated to and use revenue generated to resolve his or her debts. resolve his or her debts. An An additional purposeadditional purpose of bankruptcy law is to of bankruptcy law is to allow certain debtors to allow certain debtors to free themselvesfree themselves (to be (to be discharged) of the financial obligations they have discharged) of the financial obligations they have accumulated, after their assets are distributed, accumulated, after their assets are distributed, even if their debts have not been paid in full. even if their debts have not been paid in full.

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PurposePurpose::The primary purpose of bankruptcy is: The primary purpose of bankruptcy is:

1.1. To give an honest To give an honest debtordebtor a " a "fresh startfresh start" in life " in life by relieving the debtor of most debts. by relieving the debtor of most debts. 1.1. Bankruptcy allows Bankruptcy allows debtorsdebtors to be to be dischargeddischarged

from the legal obligation to pay most debts from the legal obligation to pay most debts by submitting their non-exempt assets, if by submitting their non-exempt assets, if any, to the jurisdiction of the bankruptcy any, to the jurisdiction of the bankruptcy court for eventual distribution among their court for eventual distribution among their creditors. creditors.

2.2. To To repay creditorsrepay creditors in an orderly manner to the in an orderly manner to the extent that the debtor has the means available extent that the debtor has the means available for payment. for payment.

There are two common forms of bankruptcy: There are two common forms of bankruptcy: liquidationliquidation and and reorganisationreorganisation. .

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A A bankruptcy casebankruptcy case is initiated by the filing of a is initiated by the filing of a petitionpetition, which contains the debtor's financial , which contains the debtor's financial information. information. Upon the filing of the bankruptcy petition, the Upon the filing of the bankruptcy petition, the debtor's assets constitute the debtor's assets constitute the bankruptcy "estatebankruptcy "estate". ". A A TrusteeTrustee is appointed to oversee the Debtor's estate, is appointed to oversee the Debtor's estate, to evaluate claims and perform other functions. to evaluate claims and perform other functions. FirstFirst: In a : In a liquidation bankruptcyliquidation bankruptcy: : The Debtor's nonexempt (i.e. legally unprotected) The Debtor's nonexempt (i.e. legally unprotected) assets are soldassets are sold off to satisfy creditor claims. This is off to satisfy creditor claims. This is referred to as "administering" the Debtor's estate. referred to as "administering" the Debtor's estate. The The CreditorsCreditors with timely filed and valid claims with timely filed and valid claims participate in a participate in a pro rata distributionpro rata distribution of the proceeds of the proceeds obtained through the liquidation. obtained through the liquidation. The distribution is based on a system of The distribution is based on a system of prioritiespriorities, in , in which certain classes of claimants are given priority which certain classes of claimants are given priority over others. over others.

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SecondSecond: A : A reorganisationreorganisation bankruptcy bankruptcy is a bankruptcy in is a bankruptcy in which a debtor which a debtor reorganisesreorganises/restructures assets and debts. /restructures assets and debts. Individuals may initiate a Individuals may initiate a reorganisationreorganisation bankruptcy in bankruptcy in order to order to retain assetsretain assets and and pay creditor claimspay creditor claims out of the out of the individual's income. individual's income. A A reorganisationreorganisation bankruptcy usually bankruptcy usually allows the Debtorallows the Debtor to to carry oncarry on while satisfying creditor claims. while satisfying creditor claims.The basic process involves a business reducing each The basic process involves a business reducing each creditor's claims to allow creditor's claims to allow partial paymentpartial payment in order for the in order for the business business to carry onto carry on with its daily commercial activity. with its daily commercial activity.Businesses may enter a Businesses may enter a reorganisationreorganisation bankruptcy in bankruptcy in order order to survive insolvencyto survive insolvency due to creditor claims due to creditor claims exceeding the ability of the business to satisfy them. exceeding the ability of the business to satisfy them. During the tendency of a bankruptcy proceeding the During the tendency of a bankruptcy proceeding the debtor is protecteddebtor is protected from most non-bankruptcy legal action from most non-bankruptcy legal action by creditors. Creditors by creditors. Creditors cannot pursue most types of cannot pursue most types of lawsuitslawsuits..

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Bankruptcy in the United Bankruptcy in the United StatesStates::

Bankruptcy in the United States is a matter placed Bankruptcy in the United States is a matter placed under Federal jurisdiction by the United States under Federal jurisdiction by the United States Constitution Constitution allows allows CongressCongress to enact "uniform laws on the to enact "uniform laws on the subject of bankruptcies throughout the United subject of bankruptcies throughout the United States." States." Its implementation, however, is found in Its implementation, however, is found in statute lawstatute law. . The relevant statutes are incorporated within the The relevant statutes are incorporated within the Bankruptcy Code, and amplified by state law in the Bankruptcy Code, and amplified by state law in the many places where Federal law either fails to speak many places where Federal law either fails to speak or expressly defers to state law.or expressly defers to state law.bankruptcy cases, particularly with respect to the bankruptcy cases, particularly with respect to the validity of claims and exemptions, are often highly validity of claims and exemptions, are often highly dependent upon State lawdependent upon State law

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Bankruptcy ChaptersBankruptcy Chapters : :The most common types of The most common types of personal bankruptcypersonal bankruptcy for for individuals are Chapter 7 and Chapter 13. individuals are Chapter 7 and Chapter 13. In Chapter 7, a In Chapter 7, a debtor surrenders debtor surrenders his or her non-his or her non-exempt property to a bankruptcy trustee who then exempt property to a bankruptcy trustee who then liquidates the property and distributes the liquidates the property and distributes the proceeds to the debtor's unsecured creditors. proceeds to the debtor's unsecured creditors. In exchange, the In exchange, the debtor is entitled to a discharge debtor is entitled to a discharge of of debt, debt, exceptexcept that the debtor will not be granted a that the debtor will not be granted a discharge if he or she is discharge if he or she is

guilty of certain types of inappropriate guilty of certain types of inappropriate behaviourbehaviour (e.g. (e.g. concealing records relating to financial condition) concealing records relating to financial condition)

and except that some debts (e.g. spousal support, some and except that some debts (e.g. spousal support, some taxes) will not be discharged even though the debtor is taxes) will not be discharged even though the debtor is generally discharged from his or her debt. generally discharged from his or her debt.

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Many individuals in financial distress own only Many individuals in financial distress own only exempt exempt property property (e.g. clothes, household goods, an older car) (e.g. clothes, household goods, an older car) and will not have to surrender any property to the and will not have to surrender any property to the trustee. The amount of property that a debtor may trustee. The amount of property that a debtor may exempt varies from state to state. exempt varies from state to state. reliefrelief is available only once in any eight year period. is available only once in any eight year period. Debtors seeking to erase all debts will have to wait eight Debtors seeking to erase all debts will have to wait eight years from their last bankruptcy before they can file years from their last bankruptcy before they can file againagainGenerally, the rights of Generally, the rights of secured creditors secured creditors to their to their collateral continues even though their debt is collateral continues even though their debt is discharged (e.g. absent some arrangement by a debtor discharged (e.g. absent some arrangement by a debtor to surrender a car or "reaffirm" a debt, the creditor with to surrender a car or "reaffirm" a debt, the creditor with a security interest in the debtor's car may repossess the a security interest in the debtor's car may repossess the car even if the debt to the creditor is discharged).car even if the debt to the creditor is discharged).

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Secured creditors may be entitled to greater Secured creditors may be entitled to greater payment than unsecured creditors. payment than unsecured creditors. In Chapter 13, the In Chapter 13, the debtor retains ownership debtor retains ownership and and possession of all of his or her assets, but must possession of all of his or her assets, but must devote some portion of his or her future income devote some portion of his or her future income to repaying creditors, generally over a period of to repaying creditors, generally over a period of three to five years. three to five years. The amount of payment and the period of the The amount of payment and the period of the repayment plan repayment plan depend upon a variety of depend upon a variety of factors, including the value of the debtor's factors, including the value of the debtor's property and the amount of a debtor's income property and the amount of a debtor's income and expenses. and expenses.

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There are two basic types of Bankruptcy proceedings. There are two basic types of Bankruptcy proceedings. LiquidationLiquidation: It is the most common type of : It is the most common type of bankruptcy proceeding. Liquidation involves the bankruptcy proceeding. Liquidation involves the appointment of a trustee who collects the non-appointment of a trustee who collects the non-exempt property of the debtor, sells it and distributes exempt property of the debtor, sells it and distributes the proceeds to the creditors. the proceeds to the creditors. RehabilitationRehabilitation of the debtor to allow him or her to use of the debtor to allow him or her to use future earnings to pay off creditors. A trustee is future earnings to pay off creditors. A trustee is appointed to supervise the assetappointed to supervise the assetAfter a bankruptcy After a bankruptcy proceeding is filedproceeding is filed, ,

creditors may not seek to collect their debts outside of the creditors may not seek to collect their debts outside of the proceeding. proceeding.

The debtor is not allowed to transfer property that has been The debtor is not allowed to transfer property that has been declared part of the estate subject to proceedings. declared part of the estate subject to proceedings.

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Bankruptcy in the United Bankruptcy in the United KingdomKingdom::

In British Law: In British Law: Bankruptcy is “dealing with debts that debtors cannot pay.” Bankruptcy is “dealing with debts that debtors cannot pay.” It is an It is an optionoption that often has to be considered when an that often has to be considered when an individual cannot pay their debts as they fall due. individual cannot pay their debts as they fall due. Bankrupts can make a Bankrupts can make a fresh startfresh start, subject to some restrictions. , subject to some restrictions. Their Their assetsassets are shared out fairly among creditors. are shared out fairly among creditors. A A first time bankrupt first time bankrupt with debts will generally receive their with debts will generally receive their discharge discharge one year one year after the date of the bankruptcy order.after the date of the bankruptcy order.Bankruptcy has a bad stigma and is publicly advertised, it Bankruptcy has a bad stigma and is publicly advertised, it should always be considered when dealing with should always be considered when dealing with insolvency insolvency casescases. . Individual Voluntary Arrangement procedure (Individual Voluntary Arrangement procedure (IVAIVA) can be an ) can be an alternative to a prospect of bankruptcy. alternative to a prospect of bankruptcy.

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Bankruptcy ProceduresBankruptcy Procedures    Anyone can go bankrupt, including members of a partnership. Anyone can go bankrupt, including members of a partnership. There are There are differentdifferent insolvency procedures for dealing with companies insolvency procedures for dealing with companies and for partnerships. and for partnerships. An individual can be made bankrupt in one of three ways:An individual can be made bankrupt in one of three ways:

1.1. Voluntarily - by the debtor themselves. Voluntarily - by the debtor themselves. 2.2. Involuntarily - by the creditor owed money (£750 Minimum). Involuntarily - by the creditor owed money (£750 Minimum). 3.3. Anyone bound by an IVA Anyone bound by an IVA

A bankruptcy order can still be made A bankruptcy order can still be made even if debtors refuse even if debtors refuse to to acknowledge the proceedings or refuse to agree to them. Debtors acknowledge the proceedings or refuse to agree to them. Debtors should therefore should therefore cooperate fully cooperate fully once the bankruptcy proceedings once the bankruptcy proceedings have begun. have begun. If they dispute the creditor’s claim, they should try and If they dispute the creditor’s claim, they should try and reach a reach a settlementsettlement before the bankruptcy petition is due to be heard. before the bankruptcy petition is due to be heard.Trying to do so after the bankruptcy order is made is both difficult Trying to do so after the bankruptcy order is made is both difficult and expensive. and expensive.

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Bankruptcy ProcessBankruptcy Process:: a court makes a bankruptcy order only a court makes a bankruptcy order only after a bankruptcy petition has been presented.  after a bankruptcy petition has been presented.  The The Court FeesCourt Fees:: There are three fees debtors may have to pay:There are three fees debtors may have to pay:

1.1. The Court fee of £120: in some circumstances the court may The Court fee of £120: in some circumstances the court may waive this fee; for example, if the debtor is on Income Support. waive this fee; for example, if the debtor is on Income Support.

2.2. The deposit of £250 towards the costs of administering debtor's The deposit of £250 towards the costs of administering debtor's bankruptcy.bankruptcy.

3.3. The fee to swear the statement of affairs. (Pleadings that the The fee to swear the statement of affairs. (Pleadings that the debtor files with the Bankruptcy Court Clerk that contains debtor files with the Bankruptcy Court Clerk that contains information about his or her financial transactions and status.)information about his or her financial transactions and status.)If the debtors are married If the debtors are married couplecouple and they are both applying for and they are both applying for bankruptcy, they will each have to pay separate fees. If they bankruptcy, they will each have to pay separate fees. If they were in business as a were in business as a partnershippartnership, each partner will have to pay , each partner will have to pay separate fees, unless all the parties apply for a joint bankruptcy separate fees, unless all the parties apply for a joint bankruptcy petition.petition.

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Where is the Bankruptcy Order MadeWhere is the Bankruptcy Order Made ? ?

Bankruptcy petitions are usually presented Bankruptcy petitions are usually presented eithereither at the High at the High Court in London or a County Court near to where debtors live Court in London or a County Court near to where debtors live or trade.or trade.A petition can be presented against a debtor even if he is not A petition can be presented against a debtor even if he is not present in England or Wales at that time, providing present in England or Wales at that time, providing he he normally lives innormally lives in, or has a recent residential or business , or has a recent residential or business connection with.connection with.The address and telephone number of his local County Court The address and telephone number of his local County Court is listed under 'Courts' in the phone book, where he should is listed under 'Courts' in the phone book, where he should look for ‘civil Courts - County Courts at: look for ‘civil Courts - County Courts at: www.courtservice.gov.uk . However, he will need to contact . However, he will need to contact the Court to find out if it has the Court to find out if it has jurisdictionjurisdiction to hear a bankruptcy to hear a bankruptcy case.case.The Court will either hear the petition straight away or The Court will either hear the petition straight away or arrange a time for the Court to consider it.arrange a time for the Court to consider it.

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What will happen at CourtWhat will happen at Court??At the hearing the Court can do At the hearing the Court can do one of four thingsone of four things::

1.1. DelayDelay the proceedings - often because the Court needs further information the proceedings - often because the Court needs further information before it can decide whether to make a bankruptcy order.before it can decide whether to make a bankruptcy order.

2.2. DismissDismiss the petition - perhaps because an administration order would be more the petition - perhaps because an administration order would be more appropriate.appropriate.

3.3. Appoint an Appoint an Insolvency Practitioner Insolvency Practitioner - if the Court thinks that an Individual - if the Court thinks that an Individual Voluntary Arrangement IVA would be more appropriate. debtor has not been Voluntary Arrangement IVA would be more appropriate. debtor has not been bankrupt or made an IVA in the previous five years.bankrupt or made an IVA in the previous five years.

4.4. Make a Make a bankruptcy orderbankruptcy order. A debtor will be bankrupt the moment the order is . A debtor will be bankrupt the moment the order is made by the Court. made by the Court. The Court may issue a The Court may issue a certificate of summary administration certificate of summary administration – if the debtor – if the debtor unsecured debts are less than £20,000 and in the previous five years he has unsecured debts are less than £20,000 and in the previous five years he has not been bankrupt or made an IVA with his creditors. This certificate will make not been bankrupt or made an IVA with his creditors. This certificate will make the administration of the debtor bankruptcy quickerthe administration of the debtor bankruptcy quickerThe Official Receiver will then be the debtor The Official Receiver will then be the debtor TrusteeTrustee in bankruptcy and the in bankruptcy and the debtor will automatically be freed from bankruptcy ('discharged') two years debtor will automatically be freed from bankruptcy ('discharged') two years from the date of the bankruptcy order. 3 years if a certificate of summary from the date of the bankruptcy order. 3 years if a certificate of summary administration is not made,administration is not made,

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The Duties of a TrusteeThe Duties of a Trustee::The The Official ReceiverOfficial Receiver, is a civil servant and an officer of , is a civil servant and an officer of the Court. He is responsible for administering the Court. He is responsible for administering bankruptcies and will act as a bankruptcies and will act as a TrusteeTrustee of the debtor of the debtor estate unless a estate unless a private sector private sector Insolvency Practitioner Insolvency Practitioner is is appointed.appointed.The Official Receiver’s main duties is to The Official Receiver’s main duties is to investigateinvestigate the the debtor financial affairs for the time before and during his debtor financial affairs for the time before and during his bankruptcy.bankruptcy.An An Insolvency Practitioner Insolvency Practitioner can be appointed as a can be appointed as a Trustee. They must be licensed, usually accountants or Trustee. They must be licensed, usually accountants or solicitors, then responsible for the disposing of debtor's solicitors, then responsible for the disposing of debtor's assets and making payments to his creditors.assets and making payments to his creditors.

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The Duties of a BankruptThe Duties of a Bankrupt::1.1. When a bankruptcy order has been made, a bankrupt must When a bankruptcy order has been made, a bankrupt must

provide the Official Receiver with provide the Official Receiver with informationinformation relating to his relating to his financialfinancial affairs within 21 days. affairs within 21 days.

2.2. Any Any assetsassets are then to be handed over to the Official Receiver are then to be handed over to the Official Receiver along with any bank along with any bank statementsstatements and insurance policies relating and insurance policies relating to debtor's property and financial affairs. to debtor's property and financial affairs.

3.3. Any assets and income increases obtained Any assets and income increases obtained during the during the bankruptcy bankruptcy should be declared to the Trustee. should be declared to the Trustee.

4.4. The debtor must not obtain credit of The debtor must not obtain credit of £250 or more £250 or more from any from any person without first disclosing the fact that he is bankrupt. person without first disclosing the fact that he is bankrupt.

5.5. Any bank or building society Any bank or building society accountsaccounts must no longer be used. must no longer be used. 6.6. The debtor must not make any The debtor must not make any direct payments direct payments to his creditors. to his creditors. 7.7. The debtor may also have to The debtor may also have to attend Court attend Court to explain why he is to explain why he is

in debt. If the debtor does not cooperate, he could be arrested.in debt. If the debtor does not cooperate, he could be arrested.

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Disadvantages of BankruptcyDisadvantages of Bankruptcy : :Bankrupt can have Bankrupt can have disastrous long-term implications disastrous long-term implications

• 1.1. Once the debtor has been made bankrupt, Once the debtor has been made bankrupt, all assets all assets belonging belonging to him come under the control of the Trustee, including his home.to him come under the control of the Trustee, including his home.

• 2.2. Restrictions Restrictions placed upon the bankrupt and the stigma of placed upon the bankrupt and the stigma of having to having to declaredeclare oneself as a bankrupt for certain transactions. oneself as a bankrupt for certain transactions.

• 3.3. Any Any businessbusiness he owns immediately closed. he owns immediately closed. • 4.4. Lose any assets Lose any assets of real value including his home, life insurance of real value including his home, life insurance

and possibly pensions and possibly pensions • 5. 5. Loses any assets he may acquire Loses any assets he may acquire duringduring his his bankruptcybankruptcy such as such as

inheritances, insurance settlements, growth of asset value in his inheritances, insurance settlements, growth of asset value in his home. home.

• 6.6. Have all bank Have all bank accountsaccounts, credit cards etc. , credit cards etc. closedclosed. Anything he . Anything he might be leasing, or buying on hire purchase, such as his car will be might be leasing, or buying on hire purchase, such as his car will be immediately returned to the owner. immediately returned to the owner.

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• 7. 7. Lose professional and business Lose professional and business statusstatus. A bankrupt may not . A bankrupt may not conduct business directly or indirectly in any name. conduct business directly or indirectly in any name.

• 8.8. Cannot take any part in the promotion, formation or Cannot take any part in the promotion, formation or managementmanagement of a company without the permission of the court. of a company without the permission of the court.

• 9.9. May not become a member of May not become a member of parliamentparliament. . • 10.10. May not become a member of the May not become a member of the local authoritylocal authority. . • 11.11. Their Their creditcredit is affected for many years after the annulment. is affected for many years after the annulment.

• A bankrupt may open A bankrupt may open a new bank a new bank or building society account or building society account but should disclose the fact that they are bankrupt. The bank or but should disclose the fact that they are bankrupt. The bank or building society may then impose conditions and limitations. building society may then impose conditions and limitations.

• The bankrupt must The bankrupt must inform the Trustee inform the Trustee of any funds available in of any funds available in the account, which exceed the normal living expenses, in order the account, which exceed the normal living expenses, in order for the Trustee to distribute among the creditors. for the Trustee to distribute among the creditors.

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The Alternatives to The Alternatives to BankruptcyBankruptcy::

Informal arrangement Informal arrangement – Debtor could consider writing to all his – Debtor could consider writing to all his creditors to see if he can reach a compromise. Include a creditors to see if he can reach a compromise. Include a timetable of when he will repay them.timetable of when he will repay them.Individual voluntary arrangement Individual voluntary arrangement ((IVAIVA)- This is a formal version )- This is a formal version of the previously described arrangement. Debtor would need to of the previously described arrangement. Debtor would need to apply to the court with the help of an authorised apply to the court with the help of an authorised insolvency insolvency practitionerpractitioner. He or she would supervise the arrangement and pay . He or she would supervise the arrangement and pay the creditors in line with the the creditors in line with the accepted proposalsaccepted proposals. . 

ProposalsProposals to creditors can be based on offer or regular to creditors can be based on offer or regular monthly paymentsmonthly payments. If 75% (in value of debt) of those creditors . If 75% (in value of debt) of those creditors who vote agree, then the arrangement is legally binding on all who vote agree, then the arrangement is legally binding on all concerned. concerned.

Regular payment Regular payment normally last for between three and five normally last for between three and five years. An IVA may safeguard the debtor property to a certain years. An IVA may safeguard the debtor property to a certain extent. extent.

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Administration orders Administration orders - If one or more creditors has a court - If one or more creditors has a court judgment against the debtor and the total debts are £5,000 judgment against the debtor and the total debts are £5,000 or less, the county court could make an administration or less, the county court could make an administration order. Under the administration order, the debtor makes order. Under the administration order, the debtor makes regular payments to the courtregular payments to the court, which will then pay the , which will then pay the creditors.creditors. While the debtor is paying the administration order, his While the debtor is paying the administration order, his

creditors can't take any creditors can't take any further action further action against him to get against him to get their money, without asking the court first. their money, without asking the court first.

Also, the debtor will not have to pay any Also, the debtor will not have to pay any interestinterest on his on his debts. debts.

He will have to pay a He will have to pay a feefee for an administration order, but for an administration order, but this will be added to the money he already owe and not this will be added to the money he already owe and not charged separately.  charged separately. 

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How long does Bankruptcy lastHow long does Bankruptcy last??A bankrupt may be A bankrupt may be dischargeddischarged (freed from obligations under the (freed from obligations under the bankruptcy order) bankruptcy order) after one yearafter one year..Discharge is not necessarily automatic and Discharge is not necessarily automatic and can be postponed can be postponed by by the Court.the Court.Discharge Discharge releasesreleases the bankrupt from the bankrupt from mostmost of the debts owed at of the debts owed at the date of the bankruptcy order. the date of the bankruptcy order.

ExceptionsExceptions include debts arising from fraud, certain crimes and include debts arising from fraud, certain crimes and fines. Certain other debts such as damages or personal injury or fines. Certain other debts such as damages or personal injury or money owed under family proceedings will be released only if money owed under family proceedings will be released only if the Court agrees.the Court agrees.

If the bankrupt has been declared If the bankrupt has been declared bankrupt bankrupt before, before, within the last within the last 15 years15 years, he will not be automatically discharged. He will only be , he will not be automatically discharged. He will only be able to apply to the Court for a discharge able to apply to the Court for a discharge 5 years after 5 years after the date of the date of his current bankruptcy order.his current bankruptcy order.After discharge, any assets that are acquired may usually be kept.After discharge, any assets that are acquired may usually be kept.

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Bankrupt AgainBankrupt Again??

Bankruptcy deals with debts at the date of the Bankruptcy deals with debts at the date of the bankruptcy order. bankruptcy order. After that date a bankrupt After that date a bankrupt should should manage his manage his finances finances more carefully. However, if he then more carefully. However, if he then incurs new debts, this could result in a further incurs new debts, this could result in a further bankruptcy order even before he is discharged bankruptcy order even before he is discharged from the first bankruptcy, which may have more from the first bankruptcy, which may have more serious consequences serious consequences such as, prosecution, if the such as, prosecution, if the debts were obtained without disclosing his debts were obtained without disclosing his bankruptcy. bankruptcy.

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Can Bankruptcy Be Reversed or Can Bankruptcy Be Reversed or CancelledCancelled??

Procedures which cancel a bankruptcy order of Procedures which cancel a bankruptcy order of annulment can only be made by the annulment can only be made by the courtcourt. . BankruptsBankrupts can apply for a reversal or annulment at can apply for a reversal or annulment at any any time iftime if: :

1.1. The bankruptcy The bankruptcy orderorder should not have been made, for should not have been made, for example because the example because the proper steps proper steps involved in obtaining involved in obtaining the order were the order were not followednot followed; or; or

2.2. All bankruptcy debts and the fees and expenses of the All bankruptcy debts and the fees and expenses of the bankruptcy proceedings have been either bankruptcy proceedings have been either paid in full or paid in full or guaranteed guaranteed to the satisfaction of the court; orto the satisfaction of the court; or

3.3. Bankrupt has reached an agreement called an Bankrupt has reached an agreement called an Individual Individual Voluntary ArrangementVoluntary Arrangement with his creditors to repay all or with his creditors to repay all or part of his debts. part of his debts.

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