What happens to your assets in Bankruptcy?

We receive a lot of calls from the public asking, Payment to your creditors in Bankruptcy?

We receive a lot of calls from the public about What happens to your Assets in Bankruptcy?

You will no longer control your assets.

You can keep the following items unless their individual value is more than the cost of a reasonable replacement:

• tools, books, vehicles and other items of equipment which you need to use personally in your employment, business or vocation;
• clothing, bedding, furniture, household equipment and other basic items you and your family need in the home.

All these items must be disclosed to the Official Receiver who will then decide whether you can keep them.

The Official Receiver/trustee will take control of all your other assets on the making of the bankruptcy order. He, or any insolvency practitioner who is appointed as trustee, will dispose of them and use the money to pay the fees, costs and expenses of the bankruptcy and then your creditors. If appointed, the insolvency practitioner's fees for acting as a trustee are also paid from the money raised by selling your assets.

The trustee may apply to the Court for an order restoring property to him or her if you disposed of it in a way which was unfair to your creditors (for example, if before bankruptcy you had transferred property to a relative for less than its worth). The trustee may claim property which you obtain or which passes to you (for example, under a will) while you are bankrupt.

A student loan made before or after the start of a student's bankruptcy is not regarded as an asset that the trustee may claim, if a balance of the loan remains payable.

If you have made a claim against another person through court proceedings, or you think you may have a claim (a right of action) against another person, the claim may be an asset in the bankruptcy.

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How bankruptcy affects you

Assets

Once you're bankrupt, the Official Receiver, or appointed trustee, can sell your assets to pay your creditors. However, certain goods aren't treated as assets for this purpose, for example:

• equipment you need for your work (eg, tools or vehicles)
• household items needed by you and your family (eg, clothing, bedding and furniture)

Earnings

The Official Receiver can look at your income (taking into account expenses such as your mortgage, rent and household bills) and decide if payments should be made to your creditors.

You may be asked to sign an 'income payments agreement' to pay fixed monthly instalments from your income for three years.

If you don't pay (or if you don't sign the agreement voluntarily), the Official Receiver can apply for an income payments order from the court to order you to pay - running for at least three years from the date of the order.

If your circumstances change, you'll need to tell the Official Receiver, so they can review these arrangements.

Ongoing commitments

You'll still have to meet ongoing commitments such as rent or debts incurred after you become bankrupt.

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Your obligations when you're bankrupt

You must:

• give the Official Receiver details of your finances, assets and creditors
• look after your assets and hand them over to the Official Receiver with the relevant paperwork, such as bank statements and insurance policies
• tell your trustee (either the Official Receiver or insolvency practitioner) about any new assets or income during your bankruptcy
• stop using credit cards and bank or building society accounts
• not obtain credit over £500 without telling the creditor that you're bankrupt
• not make payments direct to your creditors (there are exceptions to this, such as mortgage arrears and outstanding child support payments)

You may also have to go to court and explain why you're in debt.

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