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Scottish Charity Register No. SC043760

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Legal lounge: bankruptcy

May 21 2009
If you are inundated with threatening letters and phone calls, there‘s a possible way out My heart went out to the young girl perched nervously on the couch. She seemed to carry the world on her shoulders. "Kel, Emma looks like she could do with a cuppa!" said Jen. "Got any biscuits?" Emma added cheekily. We laughed and the tension eased. "What's getting you down, Emma?" I asked gently. "Well, I feel awkward talking about... I know what everyone thinks... probably right... my fault... don't know how it got this bad... spiralled out of control." Emma rambled on. "We're here to help, not judge," said Jen, soothingly. "What's out of control?" A sheepish look came on to Emma's face. "My spending. ¬¨¬£39,000," she whispered. "I can't cope. I have people making demands - threatening... I don't know what to do... can't find that kind of money." "OK, don't worry, you aren't the first, and you certainly won't be the last to get into debt," I reassured. Emma looked relieved to have got the words out. I glanced over at Jen; her brain was almost visibly ticking with ideas. "Most importantly, you're here, so you've overcome the hardest part. We can help. What do you think, Jen?" "Bankruptcy," she replied. I saw a look of horror cloud Emma's face. "That will ruin my life! I don't want to be bankrupt!" she said indignantly. "Emma, the law on bankruptcy has recently changed and the stigma once attached to it really isn't deserved," said Jen. "Bankruptcy is a way of dealing with debts you cannot pay," I added. "It allows you to make a fresh start." "What's the catch?" Emma asked suspiciously. "Restrictions are placed on you for one year," I explained. "Your bank account is cancelled and you have to set up a new one for income or benefits you receive. You can't borrow over ¬¨¬£500 without informing the lender of your situation." "You are restricted for one year from managing a company," said Jen, polishing her glasses. Emma laughed, "managing a company? A job would be a start! How would I go about this?" She was clearly coming around to the idea. "Firstly you have to complete a Debtors Petition. It's a fairly long and detailed statement of affairs. We could help with that," I offered. "You have to give details of your debts, who they are owed to and how much is owed. You'll have to disclose all your assets." "But I don't have anything! Well, apart from my nail tool kit, which is my only means of earning a little money. Oh, and this watch. But I don't want anybody getting their hands on my watch; it was a present." "Well, Emma, you do have to be careful," warned Jen. "There's no need to worry about your nail kit, as no 'tools of trade' will be taken. However, if you fail to disclose your assets honestly, it's a criminal offence. You have to swear an affidavit, which means getting the Statement of Affairs signed and confirmed in front of a solicitor or an officer of the court, affirming everything is accurate and true. Then you take the Statement and a petition for bankruptcy to the court who set a date for hearing your petition." "Don't forget the costs, Jen. It's ¬¨¬£325 deposit and ¬¨¬£157 court fees, although you may be exempt from the court fees if you receive benefits. "Then you will have an interview with the Official Receiver. They find out about how you became bankrupt and what assets you have to distribute to the people you owe. They want to ensure that as soon as you realised you couldn't pay your debts, you stopped the excessive spending." "They also want to check that you haven't given anything away or sold anything for less than it's worth prior to your bankruptcy," Jen added. "What happens in those cases?" Emma asked. Jen selected a dusty file from the bookcase. "Bankruptcy Restriction Orders... let me see... where the Official Receiver believes conduct has been dishonest or blameworthy, a bankrupt could be subject to the restrictions we discussed for a period of between two and 15 years." "But in your case, Emma, you really have nothing to worry about," I assured. "How long does it take?" "Once we have done the paperwork, you need one clear day to go to the court and see the Official Receiver." "Is that all? Will the letters and threatening calls stop then?" "Yes, your creditors will be notified of your situation and told not to contact you again." "I would make the most of a chance to start over. I wouldn't get in this position again. I can't believe there is a way," exclaimed Emma, excited now by the opportunity. "There's always a way," said Jen. "Jen, do we have a copy of the documents?" "Yes, but if you are planning to do this now, I'd better put on a fresh pot of coffee. It's going to be a long night." You can contact the Insolvency Service on 0845 602 9848.