Bankruptcy is a process that allows an individual’s assets to be realised and funds distributed to their creditors.

This is a means of freeing an individual from overwhelming debts, subject to some restrictions.

There are two means by which an individual can be made bankrupt, either on the petition of a creditor or on their own application.

The petition of a creditor:

• If an individual owes a creditor at least £5,000 and the creditor has previously served a statutory demand to try to collect the money, or has a sheriff or bailiff statement of an unsatisfied Court Judgment, they can present a creditors’ petition.

• The petition will be served on the individual and will give notice of the hearing date.

• The petition will be heard by the court who will make the bankruptcy order if they are satisfied that the debt is due and payable and the individual has been given sufficient time to repay the debt.

Individual's own application:

• If an individual is of the opinion that they are no longer able to meet their liabilities or that their liabilities exceed their assets, they can make their own application for bankruptcy.

• The application is made online (www.gov.uk/apply-for-bankruptcy).

• The application is looked at by someone who works for the Insolvency Service, called an 'adjudicator', who will decide if you should be made bankrupt.

Following the making of the bankruptcy order, the Official Receiver will contact you and let you know what you need to do. The Official Receiver is an officer of the court who manages your bankruptcy.

If you have any assets, a Licensed Insolvency Practitioner in private practice my be appointed Trustee to manage your bankruptcy in place of the Official Receiver.

To realise the assets of the individual.

To agree creditors' claims and, if funds are available, declare and pay a dividend.

To act in the best interest of creditors.

To investigate the affairs of the debtor and ensure that no bankruptcy offences have been committed.

No payments must be made to any one creditor in preference to others prior to or after the bankruptcy order.  Such payments can be overturned by the Trustee.

All debts outstanding as at the date of the bankruptcy order are included in the bankruptcy estate.  However, there are some non-provable debts which include student loans and obligations arising under family proceedings or the Child Support Acts and fines.

The debtor is no longer in control of their assets which now ‘vest’ in the bankruptcy estate.  There are certain exceptions to this including tools of trade and household items.

There are restrictions on an individual when they are made bankrupt which, if not followed, are criminal offences..  The restrictions mean that you must not:

• Obtain credit of £500 or more without first disclosing you are bankrupt.

• Carry on business in a different name from that in which you were made bankrupt without telling people you do business with that you are bankrupt.

• Be concerned, directly or indirectly, in promoting, forming or managing a limited company or acting as a director, without the court’s permission.

Bankruptcy, and the restrictions, generally end when an individual is 'discharged' from bankruptcy. This is usually automatic, 12 months after an individual is made bankrupt.  It can be longer in some circumstances, for example if the individual does not cooperate with the trustee.​

The individual's assets that 'vested' in the bankruptcy estate at the start of the bankruptcy, remain vested in the bankruptcy estate, even after an individual is discharged from bankruptcy.

Act as Trustee on the request of a creditor of the bankrupt.

Assist a creditor in presenting a petition against an individual.

Assist an individual who is considering applying for bankruptcy.

Assist the bankrupt in dealing with the Trustee appointed on their bankruptcy estate.