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An undischarged bankrupt is someone who has been declared bankrupt by a court, but who has not yet completed the process of paying off their debts. This can be a very stressful situation to be in, as you’re faced with figuring out how to pay back all of your debts while also dealing with the restrictions that come with being bankrupt.
In this guide, we’ll provide some information on what an undischarged bankrupt is, and what you can do if you find yourself in this situation.
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Bankruptcy is a legal process which can enable people who are struggling to make repayments to deal with their unaffordable debts to have a fresh start.
It is governed by the Insolvency Act of 1986 in the UK, which states that anyone declared bankrupt in England or Wales may have their assets sold off in order to settle any remaining debt.
After this point, most of your unsecured debt should be written off, however restrictions may be placed on how you conduct financial transactions.
Because it has such serious implications for your lifestyle, credit, and assets like your home, bankruptcy should only be considered as a last resort. In extreme circumstances, however, it can be an effective solution for people in need of financial assistance during a difficult time.
Bankruptcy can help people move on from unmanageable debts. The process usually involves the following steps.
Bankruptcy shouldn’t be taken lightly, which is why it’s important to seek debt advice first. A debt specialist should be able to help you decide whether bankruptcy is the right solution for your situation, or whether there is a more appropriate solution to help you deal with your debts.
If you decide bankruptcy is the right choice for you, you will need to complete a bankruptcy application form online via the Insolvency Service website. You will detail your current financial situation, and will have to pay a total fee of £680 in order to apply to go bankrupt.
After you submit your application, the adjudicator will decide whether to make a bankruptcy order or reject your application.
The adjudicator has 28 days to make their decision. If they need more information about your case, they will contact you. If they do need additional information, they will have 14 additional days to make a decision.
Upon the bankruptcy order being issued, you are officially declared bankrupt. Your banking and building society accounts will typically be frozen immediately afterward.
If the order has been granted, you will be legally required to cooperate with an official receiver – appointed by the court – to manage transactions between you and your creditors.
This can range from helping you keep or sell any assets or property, to setting up payment plans with creditors as well as filing paperwork with Companies House and HMRC.
As long as you collaborate fully with the official receiver and bankruptcy Trustee, you can be released – or discharged – from your bankruptcy after a period of 12 months.
The bankruptcy process typically lasts one year, provided that you are able to cooperate with the official receiver appointed to handle your case.
During this one-year period, various assets of yours may be taken away as part of a set repayment plan determined by the official receiver.
The good news is that after one year, you can usually make a fresh start financially and start rebuilding your credit score and your finances.
Bankruptcy is usually discharged automatically, meaning that no direct action is required to release the debtor from their obligations.
Automatic discharge typically occurs 12 months after filing for bankruptcy; however, a court order will be issued first in order to verify the selection criteria has been met.
An undischarged bankruptcy is an ongoing bankruptcy that has not yet been discharged by the court.
During this period, the bankrupt person is still under the control of the official receiver who will manage their financial affairs and their debts to creditors.
It’s important to understand that someone with an undischarged bankruptcy must comply with certain ongoing restrictions while they remain under this status.
These restrictions might include being unable to borrow more than £500 without alerting a lender, as well as ongoing obligations towards creditors.
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There are important restrictions that dictate what you can and can do both in a live bankruptcy, and after you’ve been discharged. Some of the most important restrictions are listed below.
Assuming you reside in Scotland, England, or Wales, you can travel during bankruptcy proceedings as long as it does not affect your ability to maintain payments or follow other limitations.
For those located in Northern Ireland however, a court’s permission is necessary. You must contact the official receiver handling your bankruptcy and ask for the ‘leave of the court’ before leaving the country.
When it comes to employment, there are certain restrictions in place for undischarged bankrupts. As an example, a bankrupt will be automatically disqualified from acting as director of a business until they are discharged from their bankruptcy.
Even after being discharged from bankruptcy, there are certain professions – such as accountancy or work in the financial sector – where you will have to declare your past bankruptcy, and in certain cases may be asked to leave your position.
As previously mentioned, you won’t be able to borrow money over the value of £500 without alerting the lender to the fact that you are in a live bankruptcy. This will make it more difficult to access credit.
Once you have been discharged from bankruptcy, the bankruptcy order will be listed on your credit report for a period of six years. This will have a negative impact on your credit rating, which you will have to rebuild once your debts are cleared.
Once the court has discharged your bankruptcy, you are no longer legally liable to pay any of your previously unmanageable debts.
From this point forward, creditors cannot take legal action against you or make contact regarding these debts.
On top of this, all restrictions associated with undischarged bankruptcies are no longer applicable, meaning that you can borrow more than £500 and sign surety for other individuals.
It is important to note that a bankruptcy discharge does not necessarily affect any debts from secured loans, such as mortgages, or debts accrued through fraudulent activity. In these cases, you will still be liable for the debt and will be expected to continue paying. Failure to comply could result in court action.
It’s also worth noting that after your bankruptcy has been discharged, your credit report will still show the record of your bankruptcy for a period of six years. As such, it can continue to affect your ability to access certain financial services even after discharge.
While having a discharged bankruptcy is not ideal, many lenders and financial institutions are willing to assess individual applications on their own merits, and you will be free to begin rebuilding your credit profile post-bankruptcy.
Dealing with mounting debts is stressful, especially if your debts are piling up to the point where there doesn’t seem to be a realistic way for you to pay them back.
If you owe money to creditors that you can’t repay, we can help. IVA Plan is a leading debt solutions provider in the UK. Our debt advisors understand the position you’re in, and have years of experience helping people just like you to put their debts behind them.
To get reliable debt advice and support with your finances, get in touch with IVA Plan today.
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