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Published in Debt Advice Features on Friday, March 30 2007 by Open Doors Money
Bankruptcy would free you from any overwhelming unsecured debt you have, if a bankruptcy order has been against you whether that be making yourself bankrupt or your creditors making you bankrupt you would no longer be liable to make payments to your unsecured creditors. There are exceptions to what creditors would need to be paid, however the majority of creditors who you have signed an unsecured credit agreement with would not be paid directly by yourself and it would be up to the Official Receiver to administer your bankruptcy and make payments to your creditors with funds that could be available from you.
Once you are declared bankrupt a Bankruptcy Trustee will administer it, he or she will be responsible for investigating your financial affairs, this would include asking you to make payments from any surplus income you may have. It is likely that if you are no longer making payments to your creditors you may have more income than you need for you and family to live after you have covered your day to day living expenses, this income is classed as disposable income.
One of the Trustees main aims is to ensure your creditors get a least a part payment to what they were owed. This part payment could be minimal (maybe 10p for every pound they are owed)
In order for the Bankruptcy Trustee to achieve this any assets own that are of significant value will be sold or the value in the asset may be released by other means and the payments will be split between all you creditors.
In addition to realising assets, your bankruptcy trustee may ask you where possible to make regular monthly contributions towards your bankruptcy debts. If you are in a position financially to do this (the bankruptcy trustee will determine whether you are in a position not you) then he or she will ask you to make the contributions for 36 months (3 years)
The amount you will have to pay will be determined by how much disposable income you have left, generally the trustee in bankruptcy will take 50% of this disposable income.
If the trustee decides you can make a payment then he or she will request you do so through an Income Payments Agreement (IPA)
If you do not agree to make the payment then the bankruptcy trustee may apply to the court for them to order you to make the contributions into an Income Payments Order (IPO)
