Bankruptcy is a last resort. There are other options available to you, which are generally less strong such as Administration Orders, formal Debt Management Plans (DMPs) and Individual Voluntary Arrangement – or IVA.
Each of these has different pros and cons which you should make sure you understand. You should also be clear about what you’ll be paying any company in IVA fees, for example, or charges for DMPs.
But if you’ve done all this and it really has to be bankruptcy, then one of the most important questions to ask yourself is how long the bankruptcy will last.
If you were made bankrupt on or after the 1st of April 2004, you will be automatically freed from bankruptcy after a maximum of 12 months – though this may be shorter. You’ll also become free from bankruptcy immediately if the court cancels the bankruptcy order; this would normally happen when your debts and the fees and expenses of the bankruptcy proceedings have been paid in full – or if the bankruptcy order should not have been made in the first place.
On the other hand, according to the Government’s official guide, if you haven’t complied with the terms of the bankruptcy, the Official Receiver may apply to the court for your discharge to be postponed. In this case, your bankruptcy would only end when the suspension has been lifted and the time remaining on your bankruptcy period has run.
Once your bankruptcy is discharged, this usually releases you from most of the debts you owed at the date the bankruptcy order was made. There are a few exceptions to this, including any debts arising from fraud, certain crimes and fines, and any claims which cannot be made in the bankruptcy itself – and you are only be released from a liability to pay damages for personal injuries to any person if the court thinks fit.
When you are discharged you can borrow money or carry on business and you can act as a limited company director unless you are disqualified from doing so as a result of a separate order arising from involvement with a company.
Regarding any assets you owned before the bankruptcy order, such as equity in your home or an investment policy; these assets are still controlled by the trustee who can deal with them at any time in the future, though this may not be for a number of years after your bankruptcy discharge.