Struggling to pay your bills


There are two ways in which one can be made Bankrupt. Either upon a Creditors’ Petition or upon a Debtor’s Petition.

A Creditors’ Petition is made when a creditor files a petition for your Bankruptcy, and similarly, a Debtor’s Petition is made when one petitions for their own Bankruptcy.

Breathe Financial will assist you with this process from the beginning to the end, ensuring that you receive the best advice throughout the whole process, should you require it.

In order to be made Bankrupt upon a Creditors’ Petition, there are a number of criteria/steps that they must satisfy or they must take before they can file a petition in court.  An easy way to remember what the main ones are is by using the acronym PLUS.

  • P – The Petitioning creditors’ debt(s) must be payable and the total aggregated sum must be above the “bankruptcy level”, which is currently £5,000.
  • L – The debt must be for a Liquidated sum, not a future debt  based on the future outcome of a court case for example.
  • U – The debt must be for an Unsecured debt (so a mortgage company cannot petition on the secured element of their debt, only the shortfall.
  • S – A Statutory Demand must have been served and unsatisfied (not paid) after 21 days and not set aside.

Discharge from Bankruptcy is normally automatic and in special circumstances, if you have little or no assets and nothing for the Official Receiver and any appointed Trustee in Bankruptcy to pursue, you could be offered an Early Discharge from Bankruptcy after as little as 5 months, although this practice is diminishing.

Although, if your Trustee (or the Official Receiver) suspects fowl play, they have the power to apply for the suspension of your Automatic Discharge for either an indefinite period or until they see compliance of a specific request to you.

Do not therefore enter into Bankruptcy lightly, it is recommended that you only do so once you have sought proper insolvency advice from Breathe Financial Solutions or a suitably qualified insolvency advisory service provider. You should ensure that you have been given the best advice for your particular circumstances, as the powers of the Official Receiver and Trustee can be quite severe and far reaching should they discover that you breached the Insolvency laws in anyway.

In fact, it is always recommended that you seek advice from a provider that offers more than one service, since if their specialism is Debt Management Plans it is pretty conclusive what they will recommend that you commence one immediately with them.

What are some of the penalties associated with Bankruptcy?

There are several associated penalties but Bankruptcy offers a high degree of finality i.e. if you do not have sufficient assets to discharge your creditors, the Bankruptcy expenses and liabilities in full then they are written off. You must be aware that in normal circumstances, in the UK the period in which one is bankrupt is 12 months.

If you are a director of a limited company, you cannot act as such and must step down from office. Further, you must not be seen to be a manager or shadow director or in the formation of yours or another company.

If you are trading in a partnership, under the Partnership Act you may be required to dissolve the partnership, which would not be in the best interests of your other partner(s) and potentially very costly on a number of levels.

You must disclose to any potential new creditors that you are bankrupt and if you are to incur debts or credit in the line of business over the “prescribed amount” of £500 (this includes notifying your business bank account if your overdraft is to exceed this amount.

There are many more and that is why if your particular circumstances are slightly unusual, you could find yourself in a lot of trouble and this is when Breathe Financial will assist you with every decision and guide you through the various nuances of the Insolvency Act 1986, the Insolvency Rules 1986, the Company Directors Disqualification Act 1986 and the Partnership Act 1890 (as amended).

Need help with your Bankruptcy or thinking about going down that route, take a look at how Breathe Financial’s Bankruptcy Assistance Service can help you.

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