A sad consequence of the current worldwide economic downturn is that more and more people are turning to bankruptcy as a way out of their financial difficulties. And if it wasn't for the social stigma of other people knowing about it, it`s likely that the figures for bankruptcies would be far higher than they already are. So, what does bankruptcy involve, and what are just some of the implications for individuals?
If a bankruptcy order has been made, it is advertised as an official notice in The London Gazette, and possibly-not always though-in a local newspaper. Rarely, it`s even advertised in one of the national newspapers. Bankruptcy allows a debtor to be freed from overwhelming debts so that a fresh start can be made, subject to some restrictions. Also, it ensures a person`s assets are shared out fairly among his creditors. Individuals, as well as businesses can go bankrupt. A debtor can apply for bankruptcy himself, which is voluntary bankruptcy, or involuntarily when the creditor applies to make the debtor bankrupt (subject to a minimum debt of £750). There are fees involved with going bankrupt, such as a fee to the County Court of £150, plus £345 for the Official Receiver`s work. In certain circumstances the £150 can be waived.
Although assets can be sold off to pay creditors, certain items such as equipment needed for work, and household items such as furniture and bedding are left alone. Bankruptcy normally lasts for one year. After this time, a person is 'discharged.' Restrictions as far as employment is concerned covers such jobs as a company director, charted accountant, lawyer, Justice of the peace, member of parliament, and a few more besides. None of these positions are allowed for those who are bankrupt. In addition a bankrupt can`t trade in any business under any other name unless he informs all persons concerned of the bankruptcy.
A bankrupt can`t obtain credit of £500 or more from any person without first disclosing the fact that he is bankrupt. The Official Receiver can look at a person`s income and decide if payments should be made to his creditors. He takes in to account allowable expenses as well as income. An 'income payments agreement' may then be made up by the Official Receiver so that fixed monthly installments from a bankrupt`s income is paid to creditors for three years. Although the bankruptcy order itself is for 12 months, sometimes it will last for a shorter period, other times a longer period lasting several more years if the debtor doesn't cooperate with the Official Receiver.
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