At some point or the other, you may have loaned cash from a loved one or friend and agreed to pay at a stipulated date. 

Then for some reason, you are unable to pay at that agreed date, perhaps because you are short on cash, you call him/her to apologize and ask for another due date.

Even if you cannot pay, the worst-case scenario is that you lose a friend, and no one loans you money anymore. Straightforward right?

However, this is not the case when you run an organization and owe your creditors cash. If you are unable to pay, issues may arise, and if there is no other way out after trying everything, you will need to file for bankruptcy.

So what does Bankruptcy mean?

Let us find out below as well as the process involved in filing for Bankruptcy. 

What is Bankruptcy?

Bankruptcy is a method for individuals to deal with debts they are unable to pay.

Bankruptcy is categorized into two distinct agencies for Wales and England in the UK, Scotland, and Northern Ireland.

There is equally a UK insolvency law applicable all across the United Kingdom since bankruptcy refers just to the insolvency of partnerships and individuals.

But the term bankruptcy is used frequently when referring to insolvent organizations in the general media.

 

What does the Bankruptcy process ensure?

The bankruptcy process:

• Ensures your assets are shared with your creditors or those you owe cash
• Let’s begin afresh without debts alongside a few limitations.

 

What is the UK Bankruptcy process?  

The bankruptcy process consists of the following:

The application

You will be able to apply for bankruptcy yourself online.

If another individual applied on your behalf, a copy of the petition would send to you so you know of the situation.

You can request that the court does not make you bankrupt, but you would probably need to sort out your debt or prove to the court that you don’t owe the cash.

 

What happens when the bankruptcy order is created?

An official receiver usually handles the initial phases of bankruptcy. The official receiver is attached to the court but works for the insolvency service.

If there is no insolvency practitioner appointed, the official receiver will also play your trustee’s role.

The trustee will be responsible for selling off any assets asides from items you need for your job and domestic items. The official receiver will contact you two weeks after making the bankruptcy order explaining things you must do and need to do.

 

What do you need to do after the bankruptcy order?

You need to:

• Provide information regarding your finances to the official receiver
• Provide a complete list of assets to the official receiver
• Inform your trustee of any increase in income during your bankruptcy
• Inform any individual who provides you with a loan of over £500 about your bankruptcy
• Head to the court to explain the reason you owe cash if you are requested to do so

Interview with the official receiver

If your bankruptcy gets approval, you will get an interview with the official receiver.

If you were responsible for sending your bankruptcy petition, it might occur immediately after making the bankruptcy order.

Your letter from the official receiver could either invite you for an interview in person or by phone. If you get a telephone interview, you can request a real interview if you desire.

If one of your creditors was responsible for making you bankrupt, the official receiver might also reach out to you via phone to see if there is anything you urgently need to sort out.

You need to attend the interview and work alongside the official receiver. If you do not, it could lead to an extension of your bankruptcy past the usual 12 months, and you could deal with a court examination. The better prepared you are, the easier the process would be.

Before the interview, you can reach out to the official receiver to rearrange or confirm the appointment.

Inform them if:

• There is anything you need to sort out urgently.
• You need special facilities.
• You will require time to amass the paperwork for the meeting.

If you received a questionnaire, you would need to fill it and note any part you do not understand.

Gather all of the paperwork requested and head with them to the interview or have them handy during the telephone call. Physical interviews may take as much as 3hours.

If you cannot make all the needed information available or the examiner requires more time to finish their inquiries, you may ask for an extra appointment.

The official receiver will send your creditors a report after the interview. The report will display your debts and assets. It usually requires no more than eight weeks but can sometimes take more time.

You will also report to the insolvency service if they believe you broke the law in your dealings financially.

 

Payment Rules Exceptions

There are a few exceptions to the rules of payments. You can make payment directly for:

• Secured creditors
• Debts that are not a part of the bankruptcy-like maintenance payments, court fines, and student loans are non-provable.

You will have to continue paying any new debts and rent after filing for bankruptcy. However, you may not have to pay bills that you have not to pay for after your bankruptcy order.

You may need to deposit future supplies of electricity, gas alongside other utilities. You could equally transfer your utility accounts to a partner or spouse.

 

Bankruptcy in Scotland

In Scotland, Bankruptcy refers to as Sequestration.

The Accountant in Bankruptcy is the organization that has the responsibility of administering the processes.

There are bankruptcy alternatives that can help individuals deal with debt issues, including the Debt Arrangement Scheme.

Other options consist of Trust Deeds, which are agreements arranged between the individual owing a debt to his creditors.

Some companies offer free professional advice to people dealing with debt issues. Citizens Advice Scotland is one of these companies.