Bankruptcy can only apply to individuals - including sole traders and individual members of a partnership. Bankruptcy petitions may be presented to the court:
a. By the individual himself (known as a debtor's petition)
b. By creditor(s) who are owed £750, or more, or
c. By the supervisor of an individual voluntary arrangement (where the individual has not complied with the terms of the arrangement).
The Official Receiver normally acts as receiver and manager of the bankrupt's estate and will become trustee unless an insolvency practitioner is appointed to act as trustee. An insolvency practitioner is usually appointed where there are significant assets.
The trustee realises (i.e. sells) all available assets which are included in the bankrupt's estate. This normally includes the bankrupts' house. Certain assets are excluded from the estate.
After the payment of bankruptcy fees and costs, the trustee distributes the remaining funds to the creditors in a strict order of priority.
The period of bankruptcy is normally - although not always - 1 year.
1. Relative peace of mind and relief (in right circumstances).
2. No payment obligations carried forward (subject to Income Payment Order or Arrangement which is quite common).
3. Debt slate wiped.
1. The debtor's entire estate is vested in the trustee-in-bankruptcy. The debtor loses control of his assets, except for certain assets.
2. The bankrupt has significant restrictions on obtaining post bankruptcy credit.
3. An undischarged bankrupt is prohibited from acting as a director or being a partner in a partnership.
