Bankruptcy and what it means

If you or your company owe more than £5,000 in Council Tax or Business Rates, and you have been summonsed, we may start bankruptcy or liquidation proceedings against you.

If we take this action, we will pass your account to a solicitor who will send you a statutory demand. A statutory demand gives you 21 days to pay us the full amount.

If you receive a statutory demand, you should contact the solicitor immediately.

If you do not settle the statutory demand, we will present a petition for bankruptcy or liquidation in the County Court.

If a bankruptcy order is issued against you:

  • your home could be sold to pay your debts
  • your bank accounts will be frozen
  • the official receiver will investigate your affairs
  • you will lose your credit rating and you will be blacklisted from getting credit
  • if you are declared bankrupt, the official receiver will control your spending for three years.

If a liquidation order is granted against your company:

  • you could be forced to sell your home
  • your company will be wound up by the official receiver
  • your personal bank accounts could be frozen and
  • you will not be allowed to be a company director

A bankruptcy order can still be made even if you refuse to acknowledge the proceedings or refuse to agree to them. You should therefore co-operate fully once the bankruptcy proceedings have begun.

The official receiver is responsible for looking into your financial affairs for the period before and during your bankruptcy. Any asset that might have been acquired during the term of the bankruptcy, such as inheritances, insurance payouts or maturities, equity in property, windfalls etc, and possibly pension income will all be lost and you will no longer control your assets.

The official receiver will still take your home unless your partner can prove they have an interest in the property. If this is the case the official receiver will allow your partner to purchase your share of the equity. If they are unable to do this, the trustee in bankruptcy, will after 12 months, have the right to obtain possession and subsequently issue an eviction order.

Your trustee may apply to court for an income payments order, which requires you to make contributions towards the bankruptcy debts from your income. The court will not make this order if it would leave you without enough income to meet the reasonable domestic needs of you and your family. If you have an increase or decrease in income, the order can be changed.