Nowadays more and more people file for bankruptcy, as they consider it is a great solution to their financial problems and a liquidation of their debt. However, it is a very serious step and before declaring yourself bankrupt, you should research this topic.
Bankruptcy in the United Kingdom has different properties when compared to bankruptcy in the United States. For example, the term “bankruptcy” is applied only to the individual; companies show their insolvency in legal forms such as liquidation, while in the US, bankruptcy applies both to companies (Chapter 11) and people (Chapter 7 and 13) in order to show their inability to pay.
Unfortunately, declaring bankruptcy can lead to the deprivation of all your assets, which would be sold to repay your debt. People often feel desperate and nervous in fear of losing their homes. There are many cases when people have their homes taken away but this can be avoided:
1. The Official Receiver considers your house as one of your assets, that’s why he/she will advise you to sell it with a view to satisfy your debts, regardless of whether you are the only owner or not. Your negative equity in the property can save from forfeiture of your house but on condition that you will pay the mortgage. Generally, you will lose your home if it is the only mean for paying off your debt.
2. After one year your home should be sold through an Order for Sale. You can avoid this if your interest amounts to less than £1,000; the sale won’t take place because your house’s interest should be profitable. During the time of the bankruptcy while you are still living in your home, you can ask your friend, relative or spouse to buy your beneficial interest so the Official Receiver can’t put your home up for sale.
“Beneficial interest” is your gain on sale of your house.
1. (If you are the sole owner, the beneficial interest is the entire value of the ownership. If you are bankrupt, the legal title is transferred to the Official Receiver or the Trustee.) Very confusing
2. If there are co-owners, the beneficial interest is divided into equal parts depending on the number of owners. (If you are declared bankrupt, the legal title persists to you and your co-proprietor.) In spite of this, your home won’t be safe from the sale by the Official Receiver so long as someone decide to buy your interest.
If your friend, relative, or spouse wants to buy your beneficial interest, becoming co-owners of the property, they should get in touch with the Official Receiver or the Trustee, and they can settle a low-cost bargain, according to the Insolvency Service. They will need to pay:
• £211 for litigation expenses of the Official Receiver, including potential future costs. If they won’t be needed, this part of the amount will be returned back to you. This sum should be paid anticipatorily
• the amount necessary for a lawyer or a notary to confirm your deal
• the expenses for an independent assessment of your property if you haven’t had one in a while
• the price of your beneficial interest. In addition, the value of the home is less than the sum you borrow, the beneficial interest will be £1
Your friend, relative, or whoever wants to buy your beneficial interest must present all of these costs in written form to the Official Receiver, including the mortgage payables. Even if the purchaser does not have the ability to pay at an early date, they can give money for costs subsequently, addressing to the Official Receiver or to the Trustee. However, the price for your house may increase over time-as a result, it’s possible that the beneficial interest will be in excess of £1.
You shouldn’t despair if you are the sole owner of the property. You, your friend, partner, relative, or anyone else can buy the beneficial interest from the Official Receiver, but the process will be more complex. This type of the solution is more expensive than if there were a co-owner.
Whether or not the outcome is successful, you may live in your home throughout the year after declaring bankruptcy. This measure is intended to provide you enough time to find alternative accommodations.
When you are declared a bankrupt, you should know your exact steps:
1. After you file for bankruptcy you have to list your assets and debt to the Official Receiver. Furthermore, the information about your financial transactions must be provided in the course of 21 days.
2. All the assets and increase of proceeds over the period of the bankruptcy will be reported to the Trustee.
3. You can’t get a loan bigger than £250 before the lender is notified that you are bankrupt.
4. Direct disbursement to your lenders is forbidden.
Despite the disadvantages and consequences of bankruptcy, it has grown in popularity especially in England and Wales. According to UK Debt Statistics, 318 people are proclaimed insolvent daily, meaning one individual every 62 seconds. UK personal debt has reached £1,456 trillion at the beginning of 2012.
Most people believe that bankruptcy is a great solution to their financial problems because it allows them to abandon most of their debt. It isn’t so terrible and it is not the end of your life, particularly in the UK, where your pension fund will be safe if you file for bankruptcy since May 29th 2000. If you follow the tips above, you will save not only your possession but also your home.
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