Bankruptcy Flashcards
Which debts aren’t discharged by bankruptcy
Debts gained by fraud
Maintenance and lump sum settlements under divorce
Damages for personal injuries
Student loans
Court fines
Debts created after the bankruptcy order
What restrictions now apply to someone made bankrupt
Can’t obtain credit of more than £500n from a single lender without disclosing his bankruptcy
Act as a company director
Create,manage or promote a company
Work as an insolvency practitioner
Practise as a solicitor/barrister while bankrupt
State the conditions an individual must meet to apply for a debt relief order (DRO)
be unable to pay their debts
owe no more than £20,000
own assets no more than £1,000
Disposable income no more than £50 pm after tax
Not subject to another DRO in last 6 years
Not involved in another formal insolvency procedure at time of application
Individual Voluntary Arrangements (IVA)
• An IVA is a formal agreement between a debtor and his or her creditors
An IVA sets out how the debtor is going to repay the creditors usually over a perio of five years
• It must be set up by a licensed insolvency practitioner
• The plan must be accepted by 75% of the creditors (by value) for it to be approvec
• A bankruptcy order can be cancelled if the IVA has been approved
Pros and cons of bankrupt
Pros
Don’t have to deal with creditors
Allowed to keep certain assets
Creditors have to stop most court actions
The money owed can be written off
Cons
Payments from May be made for 3 years
Credit rating affected for 6 years
House May be lost
Pension savings may be lost
Business May be closed down
Bankruptcy status made public
If main residence is in joint names
Can claim 50% of the equity and the other 50% will belong to non bankrupt
Bankruptcy claim on main residence
Can only claim the equity, difference between market value and outstanding mortgage
If jointly owned, deemed to own 50% equity
Priority of payment for bankruptcy
Expenses of bankruptcy
Claims from any employees such as pension scheme contributions & up to four months owed remuneration
Other dents except to the bankrupts spouse of civil partner
Interest due on all debts since the bankruptcy order
Debts to bankrupts spouse or civil partner
Administration order
Available if Indigirka has a county or high court judgment against them and cannot repay in full
To qualify:
Debt must be less than £5000 including interest and charges
Money must be owed to at least two creditors
Applicant must have a regular income and be able to prove that they can afford regular payments
Overturn prior transactions for bankruptcy?
Some prior transactions can SOMETIMES be overturned:
- gifts or assets sold undervalue that could have been used to repay creditors
- if made 5 years prior to bankruptcy, trustee must show debtor was insolvent at time
- preferences to place on creditor in a better position than another
- transactions to defraud creditors
Effect of bankruptcy on pensions
Pension income usually included in any assesment
Fund value is protected
If bankrupt entitled to draw pension but doesn’t, can be told to do so
Excessive contributions can be overturned
Unregistered pensions not protected
