What steps can directors take to protect themselves?
As mentioned above, the bankruptcy cost involves more than just trustee fees, but the sale of your personal assets. Once you have filed for bankruptcy and have been declared bankrupt, a trustee will be appointed.
Control of your assets will then be passed over to them. The trustee is either a licensed insolvency practitioner, or an official receiver as appointed by the court. Their role is to oversee and supervise the bankruptcy proceedings, with the aim to pay off your debts.
Any of your bankruptcy assets deemed ‘not essential’ and have a resale value are likely to be forfeit. The trustee will take charge and sell those same assets. The sale of the assets is to raise as much money as possible for your creditors.
The likes of your home, your vehicles – if not necessary for your occupation – and high-value items are at risk of sale. Therefore, you must seek bankruptcy help as soon as possible to ensure you do not reach this point. More information on bankruptcy as a whole can also be found here.
What assets can I keep?
When filing for personal bankruptcy, there are some assets that are essential to everyday life. Therefore, they are not available for sale.
Those assets that you need for your job will not be touched, being tools of the trade, however stock and excess vehicles will be sold. Similarly, basic, non-luxury household items will not be forfeit.
You are able to keep the likes of furniture, bedding and crockery. However, if any household items have a high value, such as jewellery or paintings, it’s likely the bankruptcy trustee could sell them off in an effort to repay your creditors.
What happens to bank accounts and credit cards?
When you have been declared bankrupt, you will lose control of your bank accounts and credit cards. Your bank accounts and credit card accounts will be frozen – particularly in the case of a large, overdrawn account. This is also likely to be the case with any active cards and accounts you have with stores. While your bank accounts will be frozen, you will, however, be able to access some of your money in order to buy food and other essential items, as well as pay household bills.
For those that have a joint account with a partner who hasn’t been declared bankrupt, it is still possible to access your partner’s money. Your debt is yours alone.
Pension
Different pension schemes and providers will vary with their policies, so we suggest speaking with your pension provider immediately with regards to bankruptcy help. The policies can differ in what happens to the pots should you enter personal bankruptcy.
However, any money in a pension pot – as part of an approved pension scheme – will be protected under the Official Welfare Form and Pensions Act 1999. In any case, speak to your trustee in regards to insolvency advice and how the bankruptcy will affect your pension.
Forgotten assets
When you apply for a bankruptcy order, you will have to share all details of your finances and assets with the bankruptcy trustee. If you later find that you have forgotten to reveal a particular asset, you must inform the trustee immediately. They will investigate all financial affairs. Purposely misleading the trustee can lead to a severe fine, or even imprisonment. This same legislation applies to any inheritance or even lottery win you come into, before being discharged from personal bankruptcy.
If you have also filed a claim for being mis-sold payment protection insurance, the trustee must be alerted immediately. Any claim for PPI is considered part of the bankruptcy estate and, therefore, you do not have the right to the money. The money, instead, will be taken over by the trustee in order to repay your debts. You should avoid engaging PPI firms to recover these funds, even if you have been discharged from bankruptcy, as you will not receive the funds and may still be liable to pay their fees.
If you have forgotten about a particular debt before filing for personal bankruptcy – the debt can be added later. However, those debts must be included pertaining to bankruptcy, such as:
- Credit cards
- Utility arrears
- Store card debts
- Overdrafts
It’s important to note that if you have taken out a new debt since applying for the bankruptcy order, it can not be added. For those taking out a new debt, you are not allowed to gain credit of £500 or more without telling the particular lender about your bankruptcy. Failure to do so is a criminal offence and can result in severe penalties.
What happens if I don’t tell the trustee?
As mentioned above, your trustee offers essential bankruptcy help to repay your creditors and begin to clear your name. However, if you fail to disclose all information and deliberately mislead the trustee, you are committing a criminal offence. Therefore, you could be fined or, in the worst possible case, sent to prison. It is vital you share all information regarding your finances with the trustee for the best possible bankruptcy help.
What next?
If you are suffering from financial issues, we suggest seeking immediate insolvency advice. Doing so early may just avoid the potential consequences of a bankruptcy order and the loss of your personal assets.
Our BusinessRescueExperts can discuss the procedure most suited to your case.