Insolvency Q&A part three: individuals/sole traders

Welcome to part three of our five part insolvency blog covering the most frequently asked questions around Insolvency and liquidation.

Part three will cover the most frequently asked insolvency questions by individuals and sole traders.

Part one covered general insolvency.

Part two covered questions by business owners and company directors.

For further advice about any of the topics covered in our insolvency blogs or regarding a specific scenario, please contact our insolvency & recovery specialists on 0330 024 0888 or enquiry@larking-gowen.co.uk. All initial discussions are confidential, free of charge and without obligation.

1. I’m unable to pay my debts: is bankruptcy my only option?

It depends on your circumstances, but there are a number of statutory and non statutory debt solutions that could be appropriate (such as an individual voluntary arrangement).

Contact one of our insolvency specialists to discuss your affairs and find out which is the most appropriate solution available.

2. How do I make myself bankrupt?

You can only apply for bankruptcy online (https://www.gov.uk/apply-for-bankruptcy) and it costs £680.

Your application will be looked at by someone who works for the insolvency service called an ‘adjudicator’. They’ll decide if you should be made bankrupt.

3. Will I lose my home if I declare myself bankrupt?

If you own your property and there’s sufficient equity (a surplus after repaying the mortgage and other charges) your trustee will seek to realise this for your creditors, subject to certain restrictions.

However, it could be that a partner or third party could purchase the estate’s interest so that you remain in the property. We’re happy to advise you of the options available to you.

4. Can I continue as a sole trader?

Continuing to trade is not expressly prohibited whilst you are bankrupt. However, continuing as a sole trader is difficult as you’re unable to obtain credit of more than £500 without disclosing your bankruptcy status.

Certain tools of the trade may, depending on their value, be excluded from your bankruptcy estate.

5. Can I continue to work?

In most instances, bankruptcy will not stop you from being employed, although you may be requested to pay a voluntary sum into your bankruptcy if you have surplus funds.

Certain professionals, such as a solicitor, may not be able to work whilst they are an undischarged bankrupt.

6. Can I have a bank account?

Yes. You may have a bank account that doesn’t have an overdraft facility.

7. How long does bankruptcy last?

Bankruptcy generally lasts for a period of 12 months, starting on the date of the bankruptcy order.

The official receiver or an appointed trustee has the power to apply to court to suspend a bankrupt’s automatic discharge. However, this would only normally occur when there are grounds to do so, such as the bankrupt failing to cooperate.

Bankruptcy restrictions remain in place until such time that the bankrupt receives their discharge from bankruptcy.

8. How long will my trustee be in office?

Your trustee will remain in office until all of your assets have been realised for the benefit of creditors.

Your trustee may therefore remain in office after you’ve been discharged from bankruptcy.

9. Will my landlord be told of the bankruptcy?

There’s usually no need to advise your landlord of your bankruptcy unless you owe him money.

10. Can I challenge the bankruptcy order?

A bankruptcy order can be challenged by way of an annulment on the grounds that it should not have been made in the first place or that the debts and expenses of the bankruptcy have been paid in full.

11. Do I need to attend court?

As of April 2016, the courts are no longer involved when a person wishes to declare themselves bankrupt.

If a creditor is trying to make you bankrupt then this is still a court process and you may need to attend court to defend your position. Failing to attend could result in a bankruptcy order being made against you.

Should a bankrupt fail to cooperate with the official receiver or his trustee then he may have to attend court if either of them applies to court for a public/private examination of the bankrupt.

12. Do I have to face my creditors?

No. You are not required to attend any meeting of creditors and therefore there’s no need for you to face your creditors.

You may be required to attend the official receiver or trustee’s office.

13. What debts are written off after bankruptcy?

The majority of debts are written off. However, there are some debts which remain in place after your discharge, which include fines imposed for an offence, secured debts and student loans, to name but a few. Please contact us for further information though, as this is not an exhaustive list.

14. How long will my credit rating be affected?

Your bankruptcy will show on your credit file for a period of six years and may affect your ability to obtain future credit.

15. Will my personal belongings be taken?

Personal belongings are deemed exempt assets unless they are of significant value.

If the asset is of significant value then ordinarily it will be sold, but you may be given an amount of money to buy a replacement. This is quite common if you own a car that is considered to be of significant value.

Need help?

To find out more, call 0330 024 0888 or email enquiry@larking-gowen.co.uk.