We have divided our questions and answers section into two areas: one about personal insolvency and the other on corporate or company insolvency. This section is dedicated to questions on personal insolvency matters.

If you cannot find the answer to your particular question, don’t worry! These are just a small sample of the types of questions regularly asked. Please feel free to call us at any of our locations nearest to you.

Alternatively, you can email us at personal@cba-insolvency.co.uk

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What happens to my house if I am declared bankrupt?

If you own or part-own your house, your share of the property must be realised in the bankruptcy.

It is usual for the bankrupt to be given a “breathing space”, if someone else is living at the house, i.e. wife and/or children, before any attempt is made by the Trustee in Bankruptcy to sell the house. With the introduction of the new Enterprise Act 2002, the Trustee must take steps within three years to realise the bankrupt’s interest in the house. If the Trustee fails to do this, the house can be returned to the bankrupt at the end of the three year period.

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How long does bankruptcy last?

With effect from 1 April 2004 bankrupts will normally be discharged within twelve months of the bankruptcy order and any remaining debts are written off. However, an application to court can be made for a bankruptcy restriction order in cases where the bankrupt’s conduct prior to or during bankruptcy is less than what is required. The order may last for a period of between two and fifteen years. If this should happen, an individual will face restrictions on borrowing or acting as a company director for the period in which the order is in force.

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Who has first claim on my belongings if I am bankrupt?

Basically, in the case of your principal asset, your house, anyone holding security over the asset, such as a bank or building society in the case of a mortgage, has first claim. If you have assets subject to finance agreements, e.g. your car, this can be reclaimed by the Finance company.

Other belongings

• You are entitled to keep the tools of your trade
  
  
• The Trustee will not look to remove what is considered to be ordiary domestic furnishings etc. He would only be interested in items of significant resale value, e.g. valuable works of art, antique furniture etc.
  
  
• The Trustee will allow a bankrupt to keep his/her car provided that the car is not of high value , e.g. not worth more than £2,000.

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What is the role of the Trustee?

The role of the Trustee is, in simple terms, to realise the bankrupt’s assets and distribute the money amongst the creditors. The trustee can remain in office after a bankrupt’s discharge as there may be assets still to realise or issues that are unresolved. However, this does not affect the bankrupt’s discharge.

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How does bankruptcy affect me?

• As with any situation there are difficulties which will need to be managed. You may open a bank account but you will not be given an overdraft or a cheque guarantee card. You should ensure that anyone with whom you have financial dealings with, is aware that you are subject to a bankruptcy order. Please note that it is a criminal offence to obtain credit of £250 or more either alone or with another person, without disclosing your bankruptcy
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• You should not attempt to carry on business (directly or indirectly) in a different name from that in which you were made bankrupt without informing all those you do business with, the name in which you were made bankrupt.
  
  
• You should not attempt to be involved in promoting, managing or forming a company without the court’s permission whether you are formally appointed a director or not.
  
  
• You may not be allowed to hold certain public offices.

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Is bankruptcy my only option?

No, every person who is insolvent has the right to put forward a proposal to his/her creditors, to pay off all or part of the debt owing. This method is called an Individual Voluntary Arrangement (IVA). See our brochure series for more information.

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What is an Individual Voluntary Arrangement (IVA)?

An IVA is a method by which you can put forward a set of proposals to your creditors with a view to paying back all or a percentage of your debts over a period of time laid down by you in your proposal and agreed with your creditors. It is normal to make monthly contributions into the arrangement from your income.

It is a legally binding document and prevents all creditors notified and included in the IVA from taking any legal action against you the debtor, assuming that you comply with your obligations during the IVA. You would need to engage the services of a licensed Insolvency Practitioner who would act firstly as your nominee and after the proposals are accepted by your creditors, your Supervisor, for the duration of the IVA. You dictate the terms of your IVA and therefore, are in control of what you are agreeing to.

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What are the effects on my future credit worthiness?

Your credit worthiness will be impaired and you will need to discuss any intended seeking of credit with your Supervisor.

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What are the effects on my reputation?

Unlike a bankruptcy, you are not prohibited from holding public office. You can also continue to run your business to generate income or continue to be a director.

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How does an IVA affect my house and personal belongings?

The situation regarding your house in an IVA will be largely dependent on the amount of equity you have built up. Sometimes creditors will require that in addition to your offer of payment from your future income, there must also be the release of some of your equity. The effect is to enhance the dividend on offer. This point would be discussed in more detail between you, your spouse (or partner) and your Supervisor before you would accept.

Other belongings - A similar situation as in bankruptcy, most creditors will be uninterested in your personal effects unless they know of any high value items that you possess. It is always better to state these upfront in the proposals rather than antagonise creditors by holding back information.

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How long will my IVA last?

As long as you have stated in your proposal. The average is between 2-5 years but it could be shorter or longer depending on your own personal circumstances and the amount you are offering to creditors.

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How much does it cost?

This depends on the nature of your circumstances. However, the fees of the Supervisor after the proposals are implemented are usually on a time cost basis but the Supervisor should be able to give you a clear indication of how much his fee is likely to be over the term of the arrangement. Our fee will come out of your regular monthly contributions.

At CBA, our aim is to achieve the best results for you and your creditors so do not be put off or worried about whether you can afford to consult with us in the first place. Our costs are totally transparent and we will tell you what these are once we have had the opportunity to look at your personal situation in some detail.

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Will I have to pay any costs or fees as well as making payments into the IVA?

No. All fees and costs of the arrangement will be met from the payment you make into the arrangement. However, as evidence of your ability to make the proposed monthly contributions, CBA would require the first month to be paid to the nominee before the creditors’ meeting.

For more information on IVA’s please download our PDF - Individual Voluntary Arrangements

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