Bankruptcy and Your Assets
When made bankrupt, you surrender all possessions of value, including any interest in your home. Control of everything you own passes to the Trustee.
The Trustee must be informed of all assets, it is their decision as to what you can keep.
The Trustee takes control of all assets not exempt from bankruptcy. They will arrange for their sale, using the proceeds to pay the fees, costs and expenses of the bankruptcy, before paying the creditors.
Normally, the sale of any asset should be expected to raise at least £500 towards the bankruptcy for it to be worthwhile for the Trustee to claim it.
When the bankruptcy order is made, your bank and savings accounts are seized by the Trustee. If in credit, the balance is a asset in the bankruptcy.
Items excluded from Bankruptcy
It is only reasonable that you be allowed to keep essential items and are not impeded from earning a living. Items which can to be excluded from bankruptcy include:-
- Household items essential for basic domestic needs. e.g. Clothes, Furniture, TV etc.
- A modest vehicle depending on circumstances, see – Bankruptcy & Your Car.
- A residential tenancy.
- Items needed for trade or employment such as tools and computing equipment.
- Money held in pension funds, see – Bankruptcy & Your Pension.
- Money obtained from a student loan, if a balance of the loan remains payable.
For information about property see – Bankruptcy & Your Home.
Disposing of your Assets before Bankruptcy
If Bankruptcy is looming and unavoidable, you are well advised to take personal responsibility for the sale of any assets that would otherwise be sold by the Trustee, especially your car. The Trustee would put the items for sale at public action with the intention of getting a reasonable price in the quickest time. If you can raise more money be selling the items by other means, you should do so. This may even prevent the bankruptcy if you can raise enough cash to offer a full and final settlement.
What you must not do is give way or sell your belongings as less than their true value. This is called making Transactions At Under Value. This is not allowed and may result in a Bankruptcy Restriction Order.
A question we are often asked is, What is a unreasonable asset?
Generally speaking, if you can sell a high value item and can buy a cheaper replacement with a substantial amount money remaining, then that is considered an unreasonable asset and may be claimed by the Trustee.
Something valuable but nonessential to basic domestic living, especially if it requires money to maintain, like a Horse, will also be considered to be an unreasonable asset.
Assets obtained or received during bankruptcy
Any assets or monies obtained from any source whilst serving bankruptcy (ie before discharge) may be claimed as part of the bankrupt’s estate by the Trustee. It’s an offense not to disclose such information. This includes:-
- Anything bequest in a will, for example a property.
- Something of little value at the time of the bankruptcy order, but rising in value before bankruptcy discharge.
- Claims made against another person through court proceedings.
- Any other windfall.
If you know your are to be the benefactor of a will, you may be well advised to get that will changed to the name of an non-serving bankruptcy until you are discharged from bankruptcy.
What To Do Next
If you are concerned about the prospect of losing your possessions in bankruptcy then CALL US or submit the INSTANT ADVICE form for Immediate Free Advice.
If you can avoid bankrupcy by doing an IVA instead, you have a better prospect of keeping your home, car and other belongings.