Insolvency has many repercussions, including the loss of any interest in your property, the closure of your business, and the termination of your employees.
You can petition for your own bankruptcy, known as a ""debtors petition,"" or one or more creditors who are owed more than £750.00 can petition to make you insolvent, known as a ""creditors petition.""
If you disagree with the petitioning creditor's claim that you owe them money, you must express your disagreement immediately and prior to any bankruptcy hearing, or it may be too late. Depending on your circumstances, you may be able to negotiate a payment plan with your creditors that allows you to pay off your debts in a manageable and affordable manner over time.
In the event that a petition is granted by a court and you are subsequently declared insolvent, your assets are seized by the Official Receiver. Until an Insolvency Practitioner is appointed, the Official Receiver (or the Trustee in Bankruptcy) is obligated to seize control of your assets and safeguard them. The Insolvency Practitioner is then responsible for distributing your assets to your creditors.
As an insolvent, you are required to inform the official receiver of your assets and creditors. You must allow the official receiver access to all of your assets, including funds obtained during your bankruptcy; for instance, if your income increases or you inherit assets through a will. During bankruptcy, you are prohibited from making direct payments to creditors or obtaining credit in excess of £500 (without first informing the creditor of your bankruptcy status).
If you are an insolvent who has not been discharged, it is a criminal offense to be involved with the aforementioned.
After a maximum of twelve months, you will be 'discharged' from bankruptcy. However, this period may be shortened if the official receiver deems it appropriate and notifies the court. Alternately, the Official Receiver may seek to delay the discharge if it is determined that you did not comply with your responsibilities during the bankruptcy period.
Being bankrupt severely limits your ability to manage your finances and has a greater impact on those who depend on you financially, such as your spouse or small children. ""It is crucial that if you find yourself in financial difficulty or unable to manage your debts, you seek legal counsel from a specialist in this field.""
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