How does a person become bankrupt?

Becoming bankrupt can happen in two ways. A person can apply to make themselves bankrupt if they have debts which they know they are unable to pay. The other way is that a creditor can apply to make you bankrupt if you owe them 750 or more. Once you are made bankrupt any assets and finances you do have will be split between the people or companies whom you own money to.

For a person to be declared bankrupt it must be decided by a court. If a court does declare a person bankrupt they will send the details of the case to the Insolvency Service which is the government’s departments for bankruptcy matters. The Insolvency Service will then pass the case onto an official receiver who will in turn appoint a trustee.

The person being made bankrupt must attend an interview with their appointed receiver and provide evidence of all of their finances. This includes any debts they might have excluding student loans and court fines, any assets they have and any existing money they have. The receiver will then make contact with the creditors whom the person has debts with and explain what will happen next.

For a person to be made bankrupt they have to agree to cooperate with the receiver which includes handing over any bank and credit cards. They have to cease making any payments to companies where they have outstanding debts and let the receiver and trustee take control.

The appointed trustee is responsible for the sale of any assets the debtor has for the maximum amount possible. The money made from the sale will be added to any other finances the person has to be distributed between the creditors as needed. Over a three year period after bankruptcy, a person may also be made to pay any expendable income they have to any creditors who are still owed money.

Before it gets to bankruptcy, talke to someone to help you with your debt problems.