Bankruptcy Explained

In the UK, bankruptcy is an option set aside for any individual who finds themselves in a situation where they can no longer pay their debts "as and when they fall due". The actual Bankruptcy proceeding has two basic aims. The first is to free the individual from the rising pressures coming from the creditors to whom they owe money, thus enabling him or her to make a fresh start. Secondly it ensures all assets, such as property and investments, are evenly distributed amongst the creditors.

Anyone can go bankrupt. An individual can be made bankrupt in one of three ways: voluntarily by the debtor themselves, involuntarily by the creditor to whom money is owed and thirdly by the supervisor or anyone bound by an IVA (Individual Voluntary Arrangement).

It is the Courts themselves who are officially responsible for making a bankruptcy order against an individual, although this is usually done upon the request of the individual himself or one of his/her creditors. Any assets belonging to the bankrupt then fall under the control of a Trustee, either a civil servant or officer of the Court, the Official Receiver, or a licensed Insolvency Practitioner. The appointed then has the responsibility of looking into to every aspect of the debtor's assets in order to establish some form of return to the creditor. As soon as a bankruptcy order has been made against the individual, creditors must cease to pursue payment as this then enters into the hands of the Trustee.