Bankruptcy is just one of several options to be considered when an individual cannot repay their debts. If your customer is faced with the prospect of bankruptcy, alternatives such as an Individual Voluntary Arrangement (IVA) or a Debt Management Plan should be considered as quickly as circumstances may allow. Bankruptcy can free people from overwhelming debts to give them a fresh start on their finances, nonetheless it must be taken as a serious commitment and should not be entered into lightly.

The Bankruptcy proceeding has two aims:

1. To free the individual from the pressures of creditors (people to whom they owe money) to enable him or her to make a fresh start.
2. To ensure that all available assets (such as property and investments) are distributed fairly among those creditors.

Anyone can go bankrupt, including individual members of a partnership. There are different insolvency procedures for dealing with companies and for individuals within partnerships (refer to the Business Recovery section of this website for more details).

The Courts are officially responsible for making a bankruptcy order against an individual, although this is usually done at the request of either the individual or one of his/her creditors.

The assets of the bankrupt individual then fall under the control of a Trustee: this will be either the Official Receiver (a civil servant and officer of the Court), or a licensed Insolvency Practitioner. Whosoever is appointed becomes responsible for uncovering as much detail as possible about the debtor’s assets and liabilities and, subsequently, formalising returns for the creditors from the assets available, within certain guidelines.

Once a bankruptcy order has been made against the debtor, the creditors can no longer pursue them for payment. Making payment to the creditors then becomes the responsibility of the Trustee. However, in the case of mortgage payments, if these are not made then the lender may enforce proceedings to repossess any property.