In pre-Covid times it was a great IFP tradition to sit and watch the TV channel Challenge on our lunch break, watching classics such as Catchphrase with Roy Walker and Nick Weir and Family Fortunes. However, a timeless favourite is Wheel Of Fortune with Bradley Walsh.
For those not familiar, the concept of Wheel Of Fortune is for contestants to spin the wheel and guess letters and phrases, like hangman. The wheel is full of different cash amounts that can be won, however they run the risk of the wheel landing on BANKRUPT and they lose all their money.
On a game show, you’re gutted but you move on, grasping at further opportunities to build up your pot. However, bankruptcy in real life can be a really tough and upsetting time.
What does it mean to become ‘bankrupt’?
If an individual (debtor) is made bankrupt, virtually all of their assets are taken and shared among their creditors. Bankruptcy is begun by the presentation of a “petition for a bankruptcy” order and the creditors have to prove that the debtor is unable to pay their debts. The minimum amount of debt that can be filed for bankruptcy is £5,000. Once the petition has been presented, the court could make a bankruptcy order. Until the bankruptcy is discharged the individual remains bankrupt.
Whilst bankrupt, an individual is subject to significant restrictions. An individual is not allowed to dispose of any of their property once the bankruptcy petition has been created. They cannot:
- Obtain credit of more than £500 from a single lender without disclosing their status.
- Trade under any name except that in which they are declared bankrupt.
- Act as a director of a company; or create, manage or promote a company.
- Work as an insolvency practitioner.
- Their credit rating will be affected for 6 years or until discharged, which could possibly be longer.
An individual does not technically own their own property during the process as this is owned by the “Trustee in bankruptcy”. This means that they cannot conceal any debts or assets from the trustee or leave the country and take any of their property with them.
Who else will it have an impact on?
A person’s bankruptcy has no impact on the financial position of their spouse or civil partner as their assets are not liable and one spouse/ civil partner is not liable for the debts of the other unless they are jointly owned. Creditors can pursue someone for the full amount of any joint debts you have with a bankrupt partner. Called joint and several liability. If financially connected to someone, going bankrupt can affect their credit status.
How long does bankruptcy last?
Bankrupts are usually automatically discharged one year after the order was made. The effect of the discharge is that the former bankrupt is free of debts, even if these have not been paid in full. Please note that bankruptcy is an expensive process with court fees etc adding to the overall debt amount and should only be considered as a last resort.
There are so many different charities and organisations out there that can help individuals who are bankrupt or on the route to potentially becoming bankrupt. Click here to be taken to the citizens advice website where you can find more information on bankruptcy.