Bankruptcy could be suitable for anyone who owes a large sum of money and is unable to meet their repayments – however, it’s a severe way to deal with debt and is a decision that shouldn’t be taken lightly. If you are a sole trader looking for bankruptcy help, read on to find out more about the process and discover if it is right for you.
What is bankruptcy?
A common process for many people that owe a lot of money, bankruptcy will wipe away all secured and unsecured debt. In bankruptcy cases, all assets owned by the debtor may be taken away by a trustee and their value realised – and all values made from the sale of assets will then be distributed between creditors.
As part of the bankruptcy process, your income will be scrutinised and a repayment plan will be drawn up, depending on what you can afford to repay after normal household expenditure. At the end of the bankruptcy period (usually 12 months) the debtor is discharged and the remaining debt will be written off – however, it will stay on your credit record for six years.
Is bankruptcy right for me?
Bankruptcy could be the right solution for you if you are a sole trader that owes a large sum of money (more than £30,000 in unsecured debt) and are unable to meet your repayments. It might also be the most appropriate option for those who don’t own their own home or have accepted that their property will be sold in order to satisfy the debt.
What are the alternatives?
It’s important to remember that bankruptcy is a serious, legally binding procedure with future consequences and by no means an easy way out. However, at McAlister & Co, we have a specialist bankruptcy team who are qualified to provide bankruptcy help and offer advice on the different options available.
For example, depending on your circumstances, an Individual Voluntary Arrangement (IVA) or Debt Management Plan may be better suited, so it’s important that you explore all possible options before making a final decision.
How much will I need to repay?
The amount you will need to repay will vary depending on how much you owe and your personal income and expenditure. However, at McAlister & Co we provide free, no-obligation advice about your individual circumstances – and just by getting in touch, you are taking positive action to combat your debt and take back control.
What are the advantages of bankruptcy?
Although it is a serious procedure, if you owe a lot of money and can’t repay it, there are a number of advantages to bankruptcy for sole traders:
- In most cases, bankruptcy will only last for 12 months which is typically shorter than an IVA
- Large amounts of debts can legally be written off
- Bankruptcy doesn’t have the same stigma attached to it as it once did
Disadvantages
As with all insolvency procedures, there are a number of disadvantages that should be considered too:
- If you own your home or assets, these will be sold to repay creditors
- Your financial affairs will be scrutinised
- A notice will be placed in the London Gazette
- The information will remain on your credit report for at least six years
- Restrictions will apply for the bankruptcy period
- You may have to declare your bankruptcy to your employer or professional body
How does the bankruptcy process work?
If you decide that bankruptcy is the right solution for you, the process will be as follows:
Step 1 – Application
To make yourself bankrupt, you will need to complete a bankruptcy order application and present it to the court. On the same day that you present the petition to court, you will be required to pay the fees of approximately £680.
Step 2 – Assessment
As a sole trader, if the court grants your petition, you will then meet with the Official Receiver, whose office assesses your assets, income and expenditure.
Step 3 – Payments
If you have any surplus income after normal household expenditure, this money will be in the form of an Income Payments Agreement (IPA). If you don’t consent to the IPA, an Income Payments Order (IPO) might be enforced. What’s more, the Official Receiver will also attempt to raise money through the sale of any property and assets. All this money will then be paid into ‘the estate’, which the Official Receiver is Trustee of, and shared amongst creditors.
Step 4 – Discharge
In most cases, bankruptcy restrictions will end on the first anniversary of the bankruptcy order. Once ‘discharged’ from bankruptcy, the debtor is released from the debts.
Can a creditor ask to make me bankrupt?
Any creditor to whom you owe more than £750 can ask the court to make you bankrupt through a Creditors’ Petition for Bankruptcy. In this case, the process is the same, but the creditor must meet the required fees. However, if a creditor is petitioning for bankruptcy against you and you disagree, it’s important to seek professional advice immediately to decide on the best course of action to be taken.
Next steps
If you are a sole trader facing financial difficulty, things can escalate quickly because personal and business finances are often thrown into the same pot. As a result, the financial repercussions can be much more serious – so it’s important to seek advice as soon as possible. The sooner you seek help, the more options you will have available to you, so if you think that bankruptcy might be the right solution for you, contact McAlister & Co today for expert bankruptcy help and advice.
Rest assured, we don’t need any personal details to answer initial questions on your situation, so call us today on 03300 563 600 for free confidential advice.
