It possible that one of your creditors will try and make you bankrupt. However this action is unlikely.
Included in this article:
- Can anyone make you Bankrupt?
- Are your creditors likely to take this action?
- Will HMRC petition for your bankruptcy?
- Is it better to go Bankrupt yourself?
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Can anyone make you Bankrupt?
Not just anyone can make you bankrupt. Only creditors who individually are owed at least £5000 can take this action. The process is called petitioning for your bankruptcy.
If the creditor is owed more than £5000 they can submit a Petition to the Court. If the Court agrees the debt is outstanding a date for a Hearing will be set.
At the Hearing a Judge will listen to the arguments of the creditor and your defence. If after this they decide you should be made bankrupt the Order will be issued against you immediately.
If you are are happy to be made bankrupt there is no need for you to go to the Hearing. However if you want to argue against it you must attend.
Are your Creditors likely to make you Bankrupt?
Commercial creditors such as banks and credit card companies are unlikely to make you bankrupt. This is because in most cases the process will not help them get back the money they are owed.
Some cash might be generated from the sale of any valuable assets you own or income payments you make. However the money from this is often taken in fees by the Official Receiver. This leaves the creditors with little or nothing.
They then have to write off their debt. They lose the opportunity to try and collect it from you in other ways. Given this commercial lenders will usually use alternative collection methods such as applying for a CCJ against you.
Certain creditors might petition for your Bankruptcy. These include HMRC or an individual you own money to who simply wants to make life difficult for you.
Will HMRC Petition for your Bankruptcy?
HMRC is one of the creditors who could petition for your bankruptcy. This is because they are not only interested in recovering debt owed. They also want to prevent the amount you owe them getting any worse.
Given this it is important to try and resolve any outstanding debt you have with HMRC as soon as possible. You should maintain contact with them and ask to set up a payment plan.
Generally speaking they will give you time to pay as long as the total outstanding debt can be repaid within 12-18 months. If you do not have the funds to achieve this and you want to avoid bankruptcy you should consider proposing an IVA.
Is it better to go Bankrupt yourself or wait for a Creditor to do it?
If you owe money you cannot afford to pay and you have decided that it is the right solution you could make yourself Bankrupt. Ultimately you will be treated in exactly the same way by the Official Receiver.
The downside is that you have to pay the application fee. However you are unlikely to be able to avoid this by waiting for one of your creditors to make the application.
As discussed above commercial creditors are far more likely to use other debt collection methods. Allowing them to do so could mean resolving your debt problem ends up being drawn out and stressful. Faced with this prospect you would be better just applying yourself.
You could wait for a creditor to make you bankrupt or even suggest it. However it is very unlikely to happen. Unless you owe money to HMRC it is normally best to start the process yourself.
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