Bankruptcy Order

A court order which is made following a petition for bankruptcy where it is decided that a person can no longer pay their debts as they fall due. This is seen as a last resort when all over avenues have been exhausted. Normally a bankruptcy will arise in the following circumstances: A debtor who is insolvent can be made the subject of proceedings; Creditors can, alone or jointly, apply for a debtor to be made bankrupt where someone owes at least £750; Supervisor of an IVA can apply for bankruptcy proceedings against a debtor where they have defaulted; A person can petition their own bankruptcy.

The Bankruptcy order itself is decided at a hearing in court. During the hearing the court can decide on a variety of options for the individual concerned including dismissing the bankruptcy petition, suspending the proceedings or referring the application to Insolvency Practitioner to set up an IVA instead. However if these are not deemed appropriate a Bankruptcy order will be made.

The court can also issue a Certificate of Summary Administration if the bankrupt has unsecured debts of less than £20,000, has neither been bankrupted or subject to a IVA in the previous 5 years and if the bankruptcy order is a result of a debtor’s petition only. This simplifies the whole bankruptcy procedure and also keeps the costs down. It means that an Official Receiver will administer the bankrupt’s affairs and normally proceed without investigation, although he has the power to do so. Also the bankruptcy will be discharged after 2 years rather than the usual 3 years.

Once the order is made, the person is ‘bankrupt’. Bankruptcy records remain on your credit file for six years and on land registry files for twelve years, whether you are discharged or not. This will have a significant impact on the individual’s ability to obtain credit. Also any defaults appearing on the report will not be marked as settled as usually the debt will have been written off or paid at a reduced or agreed amount. However if you contact the relevant lenders and provide a copy of your bankruptcy discharge certificate they will usually be willing to mark the accounts as settled even though they are not bound to do so.

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