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Debt Solutions
Bankruptcy Information
The Effects of Bankruptcy
When people contact us they generally have concerns in five main areas, about the effect that becoming bankrupt will have:
- What will happen to my home
- What will happen to my job
- What will happen to my bank account
- What will happen to my pension
- What will happen to my car
1. What will happen to my home.
Owned Property
When you are made bankrupt your share of the equity in the property automatically vests in your Trustee. He then has up to three years to realise that value. The important point to bear in mind is to deal with the property as soon as practically possible.
Whether there is any equity or not we will advise you what you need to do to keep the property if you so desire. If there is no equity in your property a spouse will be able to buy back your interest for a nominal pound plus costs of about £250.
Tenanted Property
If you rent your property from the council or a housing association your rights will remain unaffected as long as you continue to pay your rent.
A private landlord may have a bankruptcy clause in his tenancy agreement, but if you have been a good tenant and paid your rent and will continue to do so, the landlord should be sympathetic.
An IVA and owned property
In an IVA it is now a condition that if it is at all possible any equity that has accrued by year four should be mortgaged out for the benefit of the creditors. As this is some time in the future any equity is likely to substantial. This could actually increase the amount you are ultimately paying back, even if you can get a re-mortgage in that fourth year.
2. What will happen to my job
For the vast majority of people bankruptcy will have no effect on their job. Certain professionals may be debarred and those in financial services will need to take advice. You will also be precluded from acting as a company director during the duration of the bankruptcy. For all others a check of any contract of employment should make it clear that bankruptcy will have no effect on your employment.
3. What will happen to my bank account
Your bank account will be frozen when the bank is made aware of your bankruptcy. They will transfer any money to the Official Receiver. We will advise you how to deal with this prior to declaring yourself bankrupt. Many banks now offer basic bank accounts which will be adequate for daily banking, for those who are bankrupt.
We will provide advice on paying your direct debits and changing accounts to ensure that wages can still be accessed.
4. What will happen to my pension
If you are in an approved scheme, your pension will be untouchable. You will be allowed to continue to make payments into any scheme as part of your employment conditions. Each Official Receiver will take a view as to whether and what amounts to allow into a private scheme.
5. What will happen to my car
The Official Receiver will disclaim an interest in any vehicle with a value of less than £2,000, or which, if on finance, has less than £2,000 equity. If you have more than £2,000 equity the Official Receiver may wish to sell the vehicle, but he will provide you with £2,000 to purchase an alternative vehicle in order that you may continue to work or seek employment.
For couples who jointly own the vehicle and are both declaring themselves bankrupt, then each has the £2,000 allowance, providing both are working or looking for work.
Call us for FREE advice on 0800 680 0759
8am - 7pm Monday to Friday
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