Make yourself bankrupt
Bankruptcy can be an option for you if you have personal debts that you cannot pay by their due date. Bankruptcy ensures your assets are shared out fairly among your creditors - the people you owe money to. However, it does not guarantee that they will get paid.
Anyone with personal debts can become bankrupt. This includes individuals with personal debt, sole traders, and individual members of a partnership. If you owe someone £5,000 or more, they can apply to make you bankrupt - a creditor's petition. You can also apply for your own bankruptcy. This is called a debtor's petition.
Get advice about bankruptcy
Anyone with personal debts can become bankrupt, including individuals, sole traders and individual members of a partnership.
Bankruptcy is a serious matter, so before you decide to apply for your own bankruptcy, you should seek independent legal or financial advice about bankruptcy and the available alternatives. You must do this in good time, as professional advisers cannot help you if matters have already gone too far.
It is a good idea to take financial and legal advice as soon as you or your business start getting into financial trouble - for example if:
- you can't cover your debts
- you can't pay staff wages
- there is an acute lack of working capital
Your accountant, who may already be familiar with your business, may be able to advise you.
Free debt advice
There are a number of organisations that offer free debt advice in Northern Ireland. These include:
Alternatives to bankruptcy
There are various alternatives to bankruptcy, including:
- Informal arrangement - writing to all your creditors to see if you can reach a compromise.
- Individual Voluntary Arrangement (IVA) - a legally binding way to reduce the amount that you pay back, stop any further interest charges and reduce your monthly repayments. You would need to contact an insolvency practitioner who will advise you and consider whether your proposal is viable. Read more on IVAs.
- Administration order - if one or more of your creditors has obtained a judgment against you, the Enforcement of Judgements Office (EJO) may make an administration order. Under this order you will make regular payments to the EJO towards the total sum you owe your creditors. Your total debts must not be more than £5,000 and you will need enough regular income to make weekly or monthly repayments. Read more on administration orders.
- Debt Relief Order (DRO) - if you are unable to pay your debts, owe less than £20,000, have assets worth less than £1,000 and have less than £50 per month disposable income, after paying normal living expenses, you may be able to apply for a DRO. Read more about DROs.
How to petition for your own bankruptcy
To apply to make yourself bankrupt, you will first have to complete two Insolvency Service forms:
- The petition - form 6.30. This is your request to the High Court for you to be made bankrupt and includes the reasons for your request.
- The statement of affairs - form 6.31. This shows all your assets, debts, the names and addresses of the creditors and the amount you owe each one. It also contains a statement of truth that you will need to sign and date before you are made bankrupt.
You will also have to pay a deposit of £525 towards the costs of administering your bankruptcy which is paid to the Insolvency Service, a branch within the Department for the Economy (DfE). The payment can be made in cash, cheque or postal order. Alternatively, you can also pay online.
Where to get the bankruptcy forms
The forms are free and you can get them from the High Court. Court staff can advise you on the High Court procedure and give you the forms you need, but they cannot give you legal advice. You can also find bankruptcy forms online with the Insolvency Service.
Once you have completed the forms you will need to print them and take them to the High Court, along with a receipt of your deposit paid to the Insolvency Service.
Bankruptcy for company directors
If you are the sole director of a limited company and declare bankruptcy, you must cease acting as a director. Any shares you own in a company will be passed to the Trustee of your estate. The Trustee will seek to realise any value there is in these shares by selling them or winding up the company.
The Official Receiver (OR) (who is both a civil servant in The Insolvency Service and an officer of the High Court) will be appointed to deal with your bankruptcy. The OR will act as trustee of your estate unless an insolvency practitioner is appointed.
If you are not a shareholder in the company and the company wishes to continue, you can appoint another director. This appointment must happen before bankruptcy proceedings begin. Be aware that managing or promoting your company is prohibited until your bankruptcy is discharged. If you fail to appoint another director, or a third party shareholder fails to do so, the Trustee may appoint someone or may wind the company up.
If the company has multiple directors, you should inform the other directors immediately and resign your position with Companies House. Find further information on how to tell Companies House about changes to your limited company.
Any personally owned business assets will be claimed by the trustee unless they are exempt - see how bankruptcy affects your assets and bank account.
Bankruptcy for partnerships
If you are, or were, running a business in partnership (even if there is no formal partnership agreement) you can still apply for your own bankruptcy - see how to petition for your own bankruptcy. Unless there is a clause in the partnership agreement to the contrary, then the partnership will cease on your bankruptcy.
Your interest in the partnership will vest in the Trustee of your estate and they will seek to realise this. Even if there's a clause that means the partnership is not automatically terminated, then the Trustee will still be able to realise your share of the partnership assets.
If all the partners want to be made bankrupt, then they should apply for a joint bankruptcy petition under the Insolvent Partnerships Order (Northern Ireland) 1995. Form 16 is required and is available from the Bankruptcy and Companies Office at the High Court. Find contact details for the High Court.
The cost is the same as an individual presenting their own bankruptcy petition - see the costs involved in making yourself bankrupt.
When the bankruptcy orders are made this dissolves the partnership. All debts of the partnership, not covered by partnership assets, are included in each of the bankruptcies, under the principle of joint and several liability.
The Department for the Economy (DfE) provides further advice on how to wind-up a partnership.
Which court you should use for bankruptcy
Bankruptcy petitions are presented in the Northern Ireland High Court, Royal Courts of Justice, Chichester Street, Belfast.
The High Court will need the completed forms, two copies of each along with a receipt of your deposit paid to the Insolvency Service before it can accept your petition for bankruptcy.
Once you have completed both forms, signed and dated the bottom of every page and have your fees ready, you can go to the High Court and ask for your petition to be dealt with. To find out about fees, see the costs involved in making yourself bankrupt.
Costs involved in making yourself bankrupt
There are three fees that you will have to pay when you take your petition and statement of affairs to the High Court:
- The deposit of £525 towards the costs of administering your bankruptcy and is paid to the Department for the Economy (DfE). The deposit is payable in all cases and payment may be made in cash or postal orders, or by a cheque from a building society, bank or solicitor. Cheques should be made payable to the "Official Receiver". You can also pay online.
- The High Court fee of £144. This fee may be paid in cash or by cheque or postal order made payable to "Supreme Court Fees Account". In some circumstances the High Court may waive this fee; for example, if you are on Income Support. If you are not sure whether you qualify for a reduction in the fee or whether you are exempt from paying the fee, High Court staff will be able to advise you.
- The fee payable to a solicitor before whom you swear the contents of your statement of affairs. You should expect to pay around £7 for this service.
If you were in business as a partnership, each partner will have to pay separate fees, unless all the partners present a joint bankruptcy petition under the Insolvent Partnerships Order (Northern Ireland) Order 1995. The Department for the Economy (DfE) provide insolvency and bankruptcy forms.
The cost is the same as for an individual presenting their own bankruptcy petition. When the bankruptcy orders are made, this dissolves the partnership. All debts of the partnership as well as the debts of the individual partners are included in the bankruptcies. See further DfE guidance on winding up your own partnership.
If you are a married couple who have not traded in partnership and you are both applying for bankruptcy, you will each have to pay separate fees.
How the High Court can deal with your bankruptcy petition
At your bankruptcy hearing the High Court has the following options.
Stay or delay the proceedings
The Court may choose this option if it needs further information before it can decide whether to make a bankruptcy order.
Dismiss the petition
This might be because they feel that an administration order would be more appropriate.
If the Court makes a bankruptcy order, you will become bankrupt the moment the order is made. To find out what effect the bankruptcy order will have and the restrictions it places on you, see bankruptcy.
The official receiver's role in bankruptcy
The Official Receiver (OR) is part of The Insolvency Service (a branch within the Department for the Economy) - and is also an officer of the Court. The OR will be responsible for administering your bankruptcy specifically to find out how and why you became insolvent.
The OR will:
- Protect your assets from the date of the bankruptcy order.
- Inform your creditors that you have been declared bankrupt - by placing a notice of the bankruptcy in the Belfast Gazette and the Belfast Telegraph and by sending a report to creditors which will let them know the causes of the bankruptcy and if they will get their money back.
- Act as your trustee in bankruptcy - unless the Court, a meeting of creditors or the Department for the Economy appoints an Insolvency Practitioner (IP) to take this role. The Court may appoint an IP at the bankruptcy hearing if the terms of an Individual Involuntary Arrangement (IVA) have failed. The trustee in bankruptcy is responsible for dealing with your debts incurred before the date of your bankruptcy.
- The Official Receiver must also report to the Court any matters which indicate that you may have committed criminal offences in connection with your bankruptcy.
Your duties as a bankrupt
When a bankruptcy order has been made against you, you officially become bankrupt. You will have to give up any possessions of value and your interest in your home. It will almost certainly involve the closure of any business you run and the dismissal of your employees. Your name will appear on the individual insolvency register maintained by the Bankruptcy and Chancery Office at the High Court throughout your bankruptcy.
There are a number of things you must and must not do if you're made bankrupt:
- Give the Official Receiver (OR) a full list of your assets and details of what you owe and who to, ie your creditors, and full details of your business and personal financial affairs, eg bank statements, financial records, statements etc. You will need to contact the OR as soon as possible once the bankruptcy order has been made - the Court will give you contact details. If you do not have to go immediately to the OR's office, they will ask you questions over the telephone. You may also have to go to the OR's office at a later date.
- Collect and hand over your assets to the OR, with all your account books, records, bank statements, insurance policies and other papers relating to your assets and debts. To read about this, see bankruptcy.
- Tell your trustee in bankruptcy about any assets and increases in income you receive during your bankruptcy.
- Stop using your bank and building society accounts, credit cards and similar accounts straight away.
- Don't get credit of £500 or more from any person without first telling them that you are a bankrupt.
- Don't make payments direct to your creditors for money that you owed before the bankruptcy order was made. The OR will tell your creditors that you are bankrupt and tell them how much money - if any - will be shared out.
When your bankruptcy ends
Generally you will automatically become free from bankruptcy - known as 'discharged' - after a maximum of 12 months. However, it could be less if the OR concludes enquiries into your financial affairs sooner and files notice of this in the High Court.
Once you are discharged from bankruptcy, you are released (freed) from your bankruptcy debts and the restrictions imposed on you under the bankruptcy order. You will no longer be considered bankrupt.
You may still have certain obligations - for example, if you are making payments under an income payments order or agreement. In some cases - eg if you have not carried out your duties under the bankruptcy proceedings - your discharge could be suspended, effectively extending your bankruptcy.