A Bankruptcy Order can be made on the petition of the debtor or one or more creditors owed £5000 or more.
Upon the Order being made all assets (including the home) of the bankrupt automatically ‘vest’ in the Official Receiver and subsequently in any trustee in bankruptcy appointed by the creditors or the Secretary of State. The bankrupt’s interest in the matrimonial home will need to be realised by the trustee, if it is worth more than £1,000, within three years of the bankruptcy. If no agreement can be reached with the bankrupt or a third party to purchase that interest, the trustee will apply to Court for an Order for Possession and Sale of the Property or register a charge over the property.
The bankrupt’s other assets may also need to be realised by the trustee for the benefit of the estate, although standard household contents and tools of the trade are often exempt.
Since the introduction of the final provisions of the Enterprise Act, in April 2004, bankruptcy now usually lasts for twelve months and there are various restrictions placed on an undischarged bankrupt.
If there are sufficient assets available, not only will all creditors be paid in full with statutory interest from the date of the bankruptcy until they are paid, but the bankrupt will also be expected to pay from the estate, the costs of the petitioning creditor, the trustee and the Official Receiver’s administration fee of £1,990 for a debtors petition or £2,775 for a creditors petition plus £6,000 general fee and a realisation fee of 15% of all realisations.
Therefore a bankrupt with assets may wish to consult with a Licensed Insolvency Practitioner early on, in order to ascertain whether or not an IVA would be more suitable. It is not too late to enter into an IVA after bankruptcy providing the debtor is still undischarged. An IVA cannot be entered into post discharge in respect of Bankruptcy debts. It is, however, considerably more costly after a trustee has been appointed and therefore the earlier advice is sought, the cheaper it usually is.