Straightforward Guide To Bankruptcy, Insolvency And The Law

Including Debt Relief Orders

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• Publisher: Straightforward Publishing Digital
• Year: 2013
• ISBN:
  9781847163875
• Topic: Law
• Subtopic: Bankruptcy & Insolvency Law
• Index: Law

The revised edition of A Straightforward Guide to Bankruptcy, Insolvency an the Law is a concise guide to the processes underpinning bankruptcy and personal insolvency. In recent years, the bankruptcy process has been streamlined, with the period of bankruptcy shortened to one year. Debt relief orders are being introduced and many other policies have changed in conjunction with this. The readers of this concise book will gain a much clearer idea of the routes through the process of personal bankruptcy and company insolvency.

Chapter 1

The Personnel Involved in Bankruptcy

 

The Insolvency Service

The Insolvency Service operates under a statutory framework-mainly the Insolvency Acts 1986 and 2000, the Company Directors Disqualifications Act 1986 and the Employment Rights Act 1996. There are a network of 38 Official Receiver offices throughout England and Wales. The Enforcement Directorate and headquarters are in London, Birmingham, Manchester and Edinburgh.

What the Insolvency Service does

The Insolvency Service:

•   administers and investigates the affairs of bankrupts, of companies and partnerships wound up by the court, and establishes why they became solvent;

•   acts as trustee/liquidator where no private sector insolvency practitioner is appointed;

•   acts as nominee and supervisor in fast-track individual voluntary arrangements;

•   takes forward reports of bankrupts’ and directors misconduct;

•   deals with the disqualification of unfit directors in all corporate failures;

•   deals with bankruptcy restriction orders and undertakings;

•   authorises and regulates the insolvency profession;

•   assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay its employees;

•   provides banking and investment services for bankruptcy and liquidation estate funds;

•   advises BIS ministers and other government departments and agencies on insolvency, redundancy and related issues;

•   provides information to the public on insolvency and redundancy matters via its helpline 0845 602 9848, website, www.bis.gov.uk/insolvency, Leaflets and Redundancy Payments Helpline.

The Insolvency Service also carries out investigations into companies.

If you are thinking about going bankrupt you should contact the Insolvency Service on their helpline-addresses also contained in the back of this book.

The Official Receiver

The Official Receiver is a civil servant in the Insolvency Service and an Officer of the Court. He or she will be notified by the court of the bankruptcy or winding up order. He will then be responsible through his staff for administering the initial stage, at least, of the insolvency case. This stage includes collecting and protecting any assets and investigating the causes of the bankruptcy or winding up.

The Official Receiver’s staff will contact you, either immediately if action is urgently needed or within 2 days of receiving an insolvency order or bankruptcy order. Usually they will arrange an appointment for you to attend the Official Receiver’s office for an interview, normally within ten working days of receiving the order from the court. He or she will then act as your trustee in bankruptcy unless the court appoints an insolvency practitioner to take this role. Assuming that it is the Official Receiver who will be acting as your trustee, he or she will be responsible for looking after your financial affairs during your bankruptcy and also your financial affairs prior to you being made bankrupt.

If the Official Receiver does not require you to attend an interview you will be sent a questionnaire to fill in and return. See chapter three for the detailed process of bankruptcy and the steps involved.

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Chapter 2

Alternatives to Bankruptcy

1. Debt Management Plans

A Debt Management Plan is a way of planning your debt payments over a number of years. It has similarities to an Individual Voluntary Arrangement in that it is a way of organising and paying off debt and keeping creditors at bay.

There are two types of Debt Management Plan:

1. The type where you are provided with standard letters and you are in charge of making payments. With this method you are in charge of dealing with your creditors.

2. The type where a third party contacts all your creditors. Using this method, your financial situation is illustrated by a set of papers called a common financial statement. You will be represented by a third party and given 24hr support.

Whichever way you go, the end result is to control your debts.

The debt management plans have no legal standing and are not ratified by a court, as is an Administration Order for example.

A debt management plan can provide solutions for the following:

• Those with unsecured debts that they cannot afford to pay

• Those with equity in their properties but who would rather not re-mortgage or take out a loan

• Those who do not qualify for an IVA, i.e. those with debts under £12,000

• For people who want a short term solution to debts i.e. those who are about to sell a home

• People who don’t want to deal with their debts but would rather a third party take this on.

Essentially, a Debt Management Plan places your debt with a third party who deals with your debts on your behalf. Debt Management Plans are far more effective than taking out unregulated loans with very high rates of interest. It is very important to remember that debts with underlying security in them cannot be put into a plan.

Examples of unsecured borrowing

• Personal loans

• Overdrafts

• Credit cards

• Student loans

• Store cards

Secured debts are where the lender has a legal charge over some property of yours, so that if you default on payments, they can possess that property and sell it to get their money back.

Generally...

The length of time that the debt management plan runs will depend on the way it is structured. A simple approach is to divide your monthly payments into your debts and that is the number of months that the plan will run.

When organising the Plan you should concentrate on the priority of your debts. A priority debt is one which can have serious results if not paid, such as mortgage, utilities etc. Some loans may be secured against your home so these would be treated as priority. You will need to look carefully at your spending and cut down unnecessary expenditure. All of us have to do this, particularly in recession. Look to get cheaper deals on gas and electricity.

Beware that debt management companies, of which there are many, will charge a fee to carry out the planning and negotiating for you. The recession has provided the perfect opportunity for unscrupulous operators to target vulnerable people. When considering going down the road of a debt management plan you should contact a reputable operator, such as the Insolvency Service Enquiry Line on 0845 602 9848.

Structuring a Debt Management Plan

Before you approach a debt management company you will need to collect together information about your financial affairs and follow some simple steps:

• Make a complete list of all your debts-divide them into separate headings such as priority and non-priority debts. You will need to make offers to pay off your priority debts before tackling non-priority debts.

• The next step is to work out your income and expenditure. Be honest and make sure the amounts are realistic. What you are trying to do here is to gain a clear picture of your situation-which can be very beneficial.

• Contact your creditors and inform them that you are putting together a debt management plan.

• Do not borrow extra money to pay off your debts. Think about ways in which you can maximise your income-for example are you claiming all the benefits that you are entitled to.

If you are managing the debt management plan yourself, it is very important that you inform your creditors that you are structuring your debt. They should then be on your side. However, as debt management plans have no legal standing, creditors do not have to accept them although, if it comes to court action against you then the fact that you have a plan will stand in your favour. Creditors are not allowed to harass you and if you are being harassed then you should contact an advice an agency, such as the Citizens Advice Bureau.

It is important, once you have structured your plan, that you let your creditors have a copy so they can see what you are doing and, hopefully, agree to it.

Making payments

Most people will pay their debt management plans by standing order through their bank account. However, it is up to the client of the company how they choose to pay, as long as it is paid in full and on time.

If you are thinking of using a debt management company, you should be aware of the following before making your decision:

• Debt management organisations will only be interested in individuals who have some income and can service their debts over time in full-and who own their own home, so that the home can be used as surety again...

Table of contents

• Cover
• Title
• Copyright
• Contents
• Introduction
• Chapter 1. The Personnel Involved in Bankruptcy
• Chapter 2. Debt Management Plans
• Chapter 3. Individual Voluntary Arrangements
• Chapter 4. Administration Orders
• Chapter 5. Debt Relief Orders
• The Process of Bankruptcy
• Company Insolvencies
• Glossary
• Useful addresses
• Index