If you own your home, whether freehold or leasehold, solely or jointly, mortgaged or otherwise, your interest in the home will form part of your estate which will be dealt with by your trustee. The home may have to be sold to go towards paying your debts.
If your husband, wife or children are living with you, it may be possible for the sale in the bankruptcy to be put off until after the end of the first year of your bankruptcy. This gives time for other housing arrangements to be made. Your husband, wife, partner, a relative or friend may be able to buy your interest in your home from the trustee. This may be so even if that interest is very small, worth nothing or you owe more on the house than it is currently worth. Such a purchase would prevent a sale of the property by the trustee at a future date. Your spouse or any other interested party should be encouraged to take legal advice about the home as soon as possible.
If the trustee cannot, for the time being, sell your home, he or she may obtain a charging order on your interest in it, but only if that interest is worth more than £1,000. If a charging order is obtained, your interest in the property will be returned to you, but the legal charge over your interest will remain. The amount covered by the legal charge will be the total value of your interest in the property and this sum must be paid from your share of the proceeds when you sell the property.
Until your interest in the home is sold, or until the trustee obtains a charging order over it, that interest will continue to belong to the trustee but only for a certain period, usually 3 years, and will include any increase in its value. Therefore, the benefit of any increase in value will go to the trustee to pay your debts, even if the home is sold some time after you have been discharged from bankruptcy: the increase in the value will not be yours.
If, after a certain time, usually 3 years, your trustee has not sold or obtained a charge over your interest in the property, or applied for an order of possession or obtained a charging order against the property, or you have not come to any arrangement with your trustee about that interest, it may be returned to you.
For more information regarding bankruptcy and your home - read the publication: What will happen to my home?
Your bank account
When the bankruptcy order is made, you should
- immediately stop using your cheque books and bank cards; and
- hand them over to the Official Receiver as soon as possible.
All your bank accounts are usually 'frozen' by the bank when it becomes aware of the bankruptcy order. So you will need to make alternative arrangements for receiving money into your account and paying standing orders, direct debits etc. You should not try to open a new bank account before the bankruptcy order is made, because this account will also be frozen.
Some banks may allow you to keep using your existing bank account. But even if your bank agrees to this, they will freeze the account when they first hear about the bankruptcy order.
Will I lose the money in my bank account?
Any money in your account at the date of the bankruptcy order is an asset in the bankruptcy. So it will be claimed by the Official Receiver or the trustee (if an insolvency practitioner has been appointed in place of the Official Receiver). However, the Official Receiver or trustee may release some money to you for necessary domestic expenses.
If the bank account is in joint names, the Official Receiver or trustee will decide how much of the money to release to the joint account holder.
What happens if my bank account is overdrawn?
The money owed to the bank is a debt in the bankruptcy. So you must not make any payments direct to the bank, unless it has a charge (a form of security to ensure payment of a debt, such as mortgage) on your home. If your bank account is in joint names, the bank can ask the joint account holder to pay all the money owed.
Can I open a new bank account?
After the bankruptcy order, you may open a new bank or building society account, but you should tell them that you are bankrupt. It is for the bank or building society to decide whether they will let you operate a bank account, and they may impose conditions and limits. You should not get any overdraft or credit facilities without informing the bank or building society that you are bankrupt. You must not write cheques that are likely to 'bounce' (be dishonoured). As a bankrupt you might find it difficult to open a new bank or building society account. Some banks may allow you to keep using your existing bank account after they have contacted the Official Receiver.
Do I need to tell the Official Receiver or trustee about my new bank account?
You should tell the Official Receiver or trustee about any new bank account, and about any money in the account that is more than you need for reasonable living expenses. The Official Receiver or trustee can claim the surplus amounts to pay your creditors. If you fail to cooperate, he or she may intervene in the bank account.
If you are made bankrupt, you must not make payments direct to creditors. Creditors to whom you owe money when you are made bankrupt make a claim to your trustee (that is, either the Official Receiver or an insolvency practitioner).
They should not ask you directly for payment; if you receive any requests, pass them immediately to your trustee to deal with and tell the creditor that you are bankrupt. There are some very limited exceptions to this non-payment rule. The main ones are:
- secured creditors, such as creditors who have a mortgage or charge on your home note: if mortgage payments are not made, the lender may sell your home
- non-provable debts, such as court fines and other obligations arising under an order made in family proceedings or under a maintenance assessment made under the Child Support (Northern Ireland) Order 1991. Non-provable debts are not included in the bankruptcy proceedings and you are still responsible for paying off such debts; and
- benefit overpayments, where the Department for Communities (DfC) can recover any benefit overpayments from any further benefits you receive.
- Student loans, since 13 April 2005 all outstanding student loans cannot be claimed in bankruptcy. They remain the responsibility of the (former) student to repay within the terms of the loan arrangement.
If you were made bankrupt before 13 April 2005 you may still have to repay your student loan. Clarification should be requested from the Official Receiver.
Suppliers of services to your home (gas, electricity, and telephone) may not demand from you payment of bills in your name which are unpaid at the date of the bankruptcy order. But they may ask you for a deposit towards payment for further supplies or could arrange for the accounts to be transferred into the name of your spouse or partner. You must pay continuing commitments such as rent (if you rent your home), together with any debts you incur after the bankruptcy.
Payment to creditors
The Official Receiver will tell your creditors that you are bankrupt.
He or she may either act as the trustee or may arrange a meeting of creditors for them to choose an insolvency practitioner to be the trustee. This happens if you appear to have significant assets. You may have to go to this (or any other) meeting of your creditors.
The trustee will tell the creditors how much money will be shared out in the bankruptcy. Creditors then have to make their formal claims. The costs of the bankruptcy proceedings are paid first from the money that is available. The costs include fees that the Official Receiver or the insolvency practitioner charge for administering your case.
At least part of the claims from your employees (if any) may be preferential and are paid next, along with any other preferential debts. Finally, other creditors are paid, together with interest on all debts, as far as there are funds available from the sale of your assets. If there is a surplus, it will be returned to you. You would then be able to apply to the court to have your bankruptcy 'annulled' (cancelled).
When your trustee makes a payment to your creditors, he may place an advertisement about your bankruptcy in the Belfast Gazette and Belfast Telegraph asking creditors to submit their claims. Depending on how long it takes your trustee to deal with your assets, this advertisement may appear several years after the bankruptcy order.
You will no longer control your assets.
You can keep the following items unless their individual value is more than the cost of a reasonable replacement:
- tools, books, vehicles and other items of equipment which you need to use personally in your employment, business or vocation
- clothing, bedding, furniture, household equipment and other basic items you and your family need in the home
All these items must be disclosed to the Official Receiver who will then decide whether you can keep them.
The Official Receiver/trustee will take control of all your other assets on the making of the bankruptcy order. He, or any insolvency practitioner who is appointed as trustee, will dispose of them and use the money to pay the fees, costs and expenses of the bankruptcy and then your creditors. If appointed, the insolvency practitioner's fees for acting as a trustee are also paid from the money raised by selling your assets.
The trustee may apply to the Court for an order restoring property to him or her if you disposed of it in a way which was unfair to your creditors (for example, if before bankruptcy you had transferred property to a relative for less than its worth). The trustee may claim property which you obtain or which passes to you (for example, under a will) while you are bankrupt.
A student loan made before or after the start of a student's bankruptcy is not regarded as an asset that the trustee may claim, if a balance of the loan remains payable.
If you have made a claim against another person through court proceedings, or you think you may have a claim (a right of action) against another person, the claim may be an asset in the bankruptcy.
A trustee cannot usually claim a pension as an asset if your bankruptcy petition was presented on or after 29 May 2000, as long as the pension scheme has been approved by the Inland Revenue.
For petitions presented before 29 May 2000, trustees can claim some kinds of pensions. If you are receiving a pension or become entitled to do so before you are discharged, the pension is included as income for the purposes of an income payments order (IPO).
Your life assurance policy
Generally, your trustee will be able to claim any interest that you have in a life assurance policy.
The trustee may be entitled to sell or surrender the policy and collect any proceeds on behalf of your creditors. If the life assurance policy is held in joint names, for instance with your husband or wife, that other person is likely to have an interest in the policy and should contact the trustee immediately to discuss how their interest in the policy should be dealt with.
You may want the policy to be kept going. Ask your trustee: it may be possible for your interest to be transferred for an amount equivalent to the present value of that interest.
If the life assurance policy has been legally charged to any person, for instance an endowment policy used as security for the mortgage on your home, the rights of the secured creditor will not be affected by the making of the bankruptcy order. But any remaining value in the policy may belong to your trustee.
Work-related registrations, licences and permissions
Any registration, licence or permission you hold in connection with your work or trade might be affected by the making of the bankruptcy order.
You should inform the person who issued the registration or authority of your bankruptcy to establish if it will remain in force or will be cancelled or withdrawn. Any value attaching to these items may belong to the trustee. In considering this issue you should disregard items of a personal nature such as a driving licence.
If you are self-employed, your business is normally closed down and any employees are dismissed.
Any business assets will be claimed by the trustee unless they are exempt and you will have to give the Official Receiver all your accounting records. You are still responsible for completing all tax and VAT returns. Your employees may be able to make a claim to the National Insurance Fund for outstanding wages and holiday pay, payment in lieu of notice, and redundancy. Employees can claim in the bankruptcy for any money owed that is not paid by the National Insurance Fund.
For further details, you should contact the Redundancy Payments Service on free phone 0800 585811.
There is nothing to prevent a bankrupt from being self-employed. So you can start to trade again, subject to restrictions. You will be responsible for keeping accounting records for this business and for dealing with the tax and VAT requirements for the new business. You will need to register again for VAT if you meet the registration requirements. You should not continue to use your pre-bankruptcy VAT registration number.
Your trustee may apply to court for an income payments order (IPO), which requires you to make contributions towards the bankruptcy debts from your income.
The court will not make an IPO if it would leave you without enough income to meet the reasonable domestic needs of you and your family. If you have an increase or decrease in income, the IPO can be changed.
IPO payments continue for a maximum of three years from the date the order is made by the court and may continue after you have been discharged from your bankruptcy. Or you may enter into a written agreement with your trustee, called an income payments agreement (IPA), to pay a certain amount of your income to the trustee for an agreed period, which cannot be longer than three years. There are no fixed guidelines on IPOs or IPAs - each case is assessed individually.