A fate worse than debt?

13 Jun 2013

Over the past few years we have seen a rise in personal bankruptcy as incomes remain static, levels of consumer debt increase, savings are depleted and people struggle to pay their day to day bills, which are also steadily increasing.

Statistically single parents, separated and divorced individuals are more likely to fall into serious debt.

Bankruptcy is not gender specific or influenced by race, religion or even status.

  • Peter Stringfellow was declared bankrupt in 1992 losing a reported $20 million.
  • Eddie ‘The Eagle’ Edwards was declared bankrupt in 1992.
  • Kerry Katona was declared bankrupt in August 2008 after failing to deliver the final £82,000 of a £417,000 tax bill.
  • On the 24 January 2013, Martine McCutcheon had KPMG’s David Standish sorting out her finances after he was appointed joint trustee in bankruptcy after she declared herself bankrupt at Kingston County Court in South-West London with £187,000 debts.

The Basics

The bankrupt’s estate vests in the trustee in bankruptcy immediately upon the appointment of the trustee taking effect.  This is not the date of the bankruptcy petition unless it is a debtor’s petition issued by the bankrupt.

The bankrupt’s estate includes all property vested in or belonging to the individual at the date of bankruptcy.

Tools of the trade and the bankrupt’s domestic essentials are excluded.

Foreign property is excluded (although the trustee can get around this).

Pensions are included (unless exempted by statute) if drawn down before the date of bankruptcy.

Vested property shall include the bankrupt’s share of any jointly owned property, including the matrimonial home.

The trustee may be able to recover property transferred prior to the bankruptcy in certain circumstances.

The bankrupt can be discharged after one year but the bankrupt’s estate will continue to vest in the trustee until all creditors have been satisfied and the costs of bankruptcy have been paid.  Any surplus property or funds remaining at the end of the bankruptcy will revert back to the bankrupt.

In order to realise the bankrupt’s share on the (former) family home, or any other shared property, the trustee will usually apply to the Court for sale.

Following the introduction of the Enterprise Act 2002 the trustee has to sell the former family home or take steps to sell the property or otherwise realise his interest within 3 years from the date of the bankruptcy or the date the trustee became aware of the bankrupt’s interest, whichever is the later.  The trustee can however apply to extend this period.  The trustee can not realise an interest in property where the bankrupt’s interest is worth less than £1,000.