The UK Ministry of Justice has revealed that the number of bankruptcy petitions lodged by debtors have risen by 20% from the previous three month.

Confirmation that personal bankruptcies had risen in England and Wales was provided by the Insolvency Service, which said there were 35,682 personal bankruptcies, a record high in the first quarter of 2010.

Brian Johnson an insolvency practitioner at accountants HW Fisher said, “People who have been trying to stay afloat for the last two years are increasingly throwing in the towel.

“There is often a rise in the number of debtors’ bankruptcy petitions in the first quarter as people make a huge effort to get beyond Christmas…”

Frequently Asked Questions About Bankruptcy

For any person considering bankruptcy, as a way out of personal debt, there are many frequently asked questions. A few of the most common ones are answered below and a short list of reliable sources of further information is given at the end of the article.

What is Personal Bankruptcy?

The Insolvency Service describes bankruptcy as:

  • A way of dealing with debts that you cannot pay
  • A way to free you from overwhelming debts so you can make a fresh start, subject to some restrictions
  • A way to ensure your assets are shared out fairly among your creditors

How Long Does Bankruptcy Last?

Although it can vary, a bankrupt is normally discharged after 12 months. However if the bankrupt does not co-operate with the trustee or Official Receiver or does not comply with the provisions of the bankruptcy order the court may be requested to stop the discharge from taking place.

Will the Family Home be Sold to Pay the Debts?

The trustee or Official Receiver will sell the family home if it is the only way to release money for the creditors. This may happen even if the home is jointly owned, freehold or leasehold. However the sale may be temporarily postponed to allow the family to make alternative arrangements.

The sale can be stopped if the bankrupt sells what is known as the beneficial interest to a third person who could be another family member or friend.

What is Beneficial Interest?

Beneficial interest is simply the value of the bankrupts’ share of the home. For example if they are sole owners, the beneficial interest is the total value of the property less any outstanding mortgage or other debt secured on the home. If a joint owner the beneficial would be half the value of the property.

What Happens to the Bank Account When Made Bankrupt?

After bankruptcy a bank account will be ‘frozen’ and any money in it will be deemed an asset and claimed by the trustee or Official Receiver although an allowance may be given for household expenses. If it is a joint account a decision will be made as to the amount given to the other account holder.

It should be possible, if the existing account is closed, to open another basic bank account, which will not have overdraft of other credit facilities. However not all banks are inclined to do this so it may take a bit of ‘shopping’ around before finding a willing bank.

Sources of bankruptcy Advice:

  • Insolvency Service
  • Consumer Credit Counselling Service (CCCS)

This article is compiled using journalistic research and is not offered as financial advice,

Sources:

BBC, Bankruptcies to keep on rising, figures suggest, website accessed 16/5/10

Insolvency Service, What is Bankruptcy? Website accessed 16/5/10

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