A reader asked:
I went bankrupt in March 2017 and discharged in 2018. I am not paying an IPA. My question is about savings. Can I save now without any risk of my savings being taken from me?
Also my grandmother wants to put a large sum of money in my name but I’m not sure if it would be safe so the last thing I want is for her to lose money, so I’ve been reluctant to do it.
This article looks in detail at what happens when you are discharged from bankruptcy: the practicalities, the implications for savings and gifts and the restrictions that end after discharge.
Contents
When do you get discharged and why may this be suspended?
Almost everyone is discharged 12 months after the date they went bankrupt.
During these 12 months when you are bankrupt, you have to co-operate with the Official Receiver (OR) and give information when asked to do so.
If you don’t co-operate, the OR may ask the court to suspend your discharge, so you won’t be discharged at the end of the 12 months.
This is very rare and you will know if this happens, it isn’t done in secret.
This isn’t something you should worry about. The OR doesn’t expect you to have a perfect memory or receipts for everything bought over the last five years. “Not co-operating” means refusing to answer questions or concealing things.
If your discharge from bankruptcy is suspended, you will be told by the court whether you have to do anything in order to get your discharge.
Discharge day – nothing happens!
You may have had the day ringed in your diary for months, but nothing visibly happens when you are discharged! You don’t get a certificate or even an email from the OR.
If you haven’t heard anything from the OR about your discharge being suspended you can safely assume that you have been discharged.
Getting confirmation that you have been discharged
You can ask for a confirmation letter that you have been discharged from the Insolvency Service by emailing them at discharge.queries@insolvency.gsi.gov.uk – this is free.
Some lenders, especially mortgage lenders, will want to see a Certificate of Discharge. How you get this depends on how you went bankrupt.
If you applied for bankruptcy online after April 2016, you can email the Insolvency Service and ask for a Certificate of Discharge. This is free.
If you went bankrupt before April 2016 or if you were made bankruptcy by a creditor you should complete form LOC013 and send it with a cheque payable to ‘HM Courts and Tribunals Service’ to the court that made you bankrupt. It costs £70 for three copies of your Certificate of Discharge, and £10 for additional extra copies.
What happens when you are discharged
When you are discharged you are released from your debts (except for any such as student loans which couldn’t form part of your bankruptcy .)
Your bankruptcy ends, you are no longer bankrupt!
After discharge, you don’t have to tell the OR about assets or money that you receive, unless you were already entitled to these before your discharge.
The events you no longer have to tell the OR about include:
- receiving redundancy money (see Redundancy and bankruptcy);
- getting an inheritance (unless the person died before you were discharged, see Inheriting money when bankrupt); and
- a pension lump sum or money you withdraw from a pension (see Bankruptcy and Pensions).
There is a small exception here if you are paying an IPA/IPO, see below.
So the reader can safely be given money by her grandmother – it won’t be at risk at all.
And she can save as much as wants. She could have saved a small emergency fund before discharge, but few people can afford to save much at that point.
The restrictions of bankruptcy also end when you are discharged, unless you have a BRO/BRU, see below, so you will be able to:
- borrow more than £500 without telling the lender you are bankrupt (but if a lender asks if you have ever been bankrupt or insolvent, you still have to reply Yes);
- be a company director;
- change the name of your business if you’re self-employed; and
- buy a council house using the ‘right to buy’ scheme.
Your possessions and assets
Personal possessions – normally safe!
Most people do not lose any personal possessions when they go bankrupt, see Will I lose my lawnmower? and other questions for details.
Most assets apart from your home that have to be sold are dealt with within the twelve month bankruptcy period.
In the unusual situation that you have assets that the OR has told you within the 12 months that may have to be sold, this still applies after discharge.
If you have not heard anything from the OR by the time you are discharged, that is the end. You will not be asked anything afterwards and nothing can be taken.
Family home
There’s a 3-year time limit for the OR to start legal action to sell the family home. If your share of the equity (or your “beneficial interest”) is less than £1,000 three years after you went bankrupt, no action will be taken, the interest will return to you and the restriction at Land Registry will be removed.
“The right to something” may be an asset that now belongs to the OR
Sometimes you have a legal right to do something, for example make an insurance claim, ask for a refund, sue someone.
If you had this legal right before you went bankrupt, this right is an asset that transferred to the OR when you went bankrupt. It does not transfer back to you when you are discharged,
This may include any ongoing complaints and court cases, and also ones which have not yet been started.
That last point surprises and disappoints many people. There is no point in you making a complaint about PPI mis-selling or asking for a payday loan refund for loans taken prior to your bankruptcy after your discharge because the money will go to the OR, not to you.
BRO/BRUs – restrictions still apply
The government says “Any dishonest or blameworthy behaviour could lead to a BRO”. That may sound alarming because most people who go bankrupt think they have been blameworthy to some extent… but very few people get BRO/BRUs.
If the OR has imposed a Bankruptcy Restriction Order (BRO), or you have agreed to a Bankruptcy Restriction Undertaking (BRU) you will still be discharged after twelve months and released from your debts.
But a BRO/BRU means you will continue to have a series of restrictions on what you can do for the period of your BRO/BRU.
IPA/IPOs – must be set up before discharge
If you don’t have an IPA/IPO
More than 80% of people who go bankrupt do not have an Income Payments Agreement (IPA) or an Income Payments Order (IPOs) set.
If you don’t have an IPA when you are discharged one can’t be set up later and you don’t have to tell the OR about any changes to your income or expenses.
(There is a rare exception – if the OR has applied to court for an IPO before your discharge, then it can be set up afterwards. If this affects you, you will know about it.)
IPAs/IPOs carry on after discharge
Here you have to make monthly payments to the Official Receiver for three years from the point it was set up. During these three years, you have to tell the OR about changes to your income and expenses and the IPA may be adjusted.
Being discharged doesn’t change this.
You should also tell the OR about any windfalls that you receive after your discharge while your IPA is continuing.
This does not mean that the OR can claim your redundancy money or an inheritance – this won’t happen, see the links above.
But some windfalls are actually a form of income, for example a refund from the tax man, and you may need to pay a lump sum to the OR for these.
Your credit record after discharge
The details of your bankruptcy are kept on the Individual Insolvency Register for three months after discharge. If you check the register after this, your name should no longer appear, unless you have a BRO/BRU.
Your credit rating won’t improve immediately you are discharged. It will take some weeks or even a month or two for creditors to mark your debts as settled/partially settled with a zero balance owing and the bankruptcy marker itself will remain on your file for another five years.
After a few months, you can start the credit repair process, including getting creditors to correct any records which are wrong. See How to repair your credit record after bankruptcy for details.
“What about… ?”
The Insolvency Service helpline can answer general questions, but if you have questions about your specific case, the best thing to do is to contact your OR’s office.
The Insolvency Service helpline
Repairing your credit after bankruptcy
What happens when? A bankruptcy timeline
Andrew says
I rang the Insolvency Practioner and they said if you have assets etc you have to comply even when you are discharged from bankruptcy. I told them I had zero assets and filled in their expenditure form 6 months ago and I have no IPA therefore I don’t need to comply no more. They didn’t say much but I called my creditors and my debts are settled so still not sure why they have contacted me
Sara (Debt Camel) says
hmmm I suggest you send them a letter repeating what you have just said but rephrased as “I am happy to complete this expenditure form if you can explain to me why it is required as I have no assets and was discharged from bankruptcy on ddmmyy without an IPA/IPO in place.”
Tom says
Hello,
In the above Article you state “If you don’t have an IPA/IPO when you are discharged – and more then 80% of people don’t – one can’t be set up later…………” and you go on to say “There is a rare exception – if the OR has applied to court for an IPO before your discharge, then it can be set up afterwards.”
Since my Bankruptcy I have had one meeting with the OR and I have never heard from the appointed Insolvency Practitioner, no IPA/IPO has been requested or set-up. I was discharged according to the register on 8 November 2018, and since my original meeting with OR in December 2017 I have received no formal communications from the OR.
My question is could the OR have applied to the court for an IPO prior to discharge without my knowledge?
I just want to put this episode behind me and move on with my life knowing there are no hidden surprises.
Many thanks
Sara (Debt Camel) says
I don’t think you have anything to worry about. An IPO will not have been applied for unless you refused to agree to an IPA. And then you would have been told what the OR was doing. Unless you had gone into hiding, this can’t have happened without you knowing!
If you want to be 100% sure, contact the OR’s office and they will confirm this.
Tom England says
No I have always tried to co-operate with the OR and he has had my address, telephone and email which has never changed.
Thank you for your prompt response
Bridie says
Hi. I was declared Bankrupt in May last year. I may be entitled to a sum of money from my ex Husbands pension. Claim made before Bankruptcy. If the sum is higher than my debts , am I able to keep remaining amount? I may not know until after my 1 year discharge. Bit confused with it all. Thanks
Sara (Debt Camel) says
This claim is as part of a divorce settlement? If it is, you need to ask your solicitor about this.
Amanda says
Hi I had to go bankrupt in 2006 I got my discharge. In January 2007 I claimed some ppl which went straight to them I wondered why once discharged . Will this effect me claiming other ppl.
Sara (Debt Camel) says
All PPI refunds for PPI you paid before your bankruptcy will go to the OR, even now. Unless you can claim for PPI you paid afterwards, there is no point. See https://debtcamel.co.uk/ppi-iva-dro-bankruptcy/ for why.
Barbara hawkins says
Hi I was made bankrupt 2006 discharged early 2007 I have ppi relating to prior 2006. If I claim this would I have to pay it back towards bankruptcy
Thanks barbara
Sara (Debt Camel) says
Yes. See https://debtcamel.co.uk/ppi-iva-dro-bankruptcy/ for details.
Maria says
Hi I’m about to apply for bankruptcy. I have about £200 left after paying debts but this will be for food, kids haircuts, school clothes, regular clothes, car maintenance. £200 a month is not enough really.
I might be getting a bonus at work end of the year.
My question is- Will I have to give that money or keep it for the essentials mentioned above which I won’t be able to afford on a monthly basis? Thank you
Sara (Debt Camel) says
Hi Maria,
have you talked to an adviser about bankruptcy? It may well be the best option for you but it’s always good to check and the adviser can answer your questions about whether you may have to make any monthly payments to the Official Receiver after bankruptcy. 5 out of 6 people going bankrupt don’t have to make any payments.
You can talk to National Debtline this morning on 0808 808 4000.
To answer your question, £200 a month isn’t enough for food and toiletries for you and one child, let alone all the other things you have listed. BUT once you go bankrupt, you won’t be paying any debts, so you will have more than £200 left. What matters is how much money you have left after the essential bills (rent, utilities, council tax etc). the OR will allow money for clothes, uniforms, haircuts, car maintenance. it is a fair system.
Iain says
Hi, I was declared bankrupt in August 2013 and discharged in 2014, there are still two creditor on my credit file showing as a default. How can I get the settled?
Also, When will the bankruptcy be completely rrmoved from my credit file?
Sara (Debt Camel) says
This article looks at how to get your credit record corrected: https://debtcamel.co.uk/credit-file-after-bankruptcy/
The bankruptcy marker itself will drop off in August 2019. So its a question of making sure all the debts in your bankruptcy also drop off then.
Maria says
Hi again. My partner has bought a car for me to use for work as my old car is a hire purchase and will be taken away once I go bankrupt.
Can my partner put me down as the registered keeper on the V5 if he is the owner?
How will this affect the bankruptcy?
Thank you
Sara (Debt Camel) says
yes you can be the registered keeper for a car that is owned by someone else.
This will not be affected by your bankruptcy as you do not own this car, but you will need to produce proof that it was bought by your partner.
I will move this question to https://debtcamel.co.uk/lawnmower-bankruptcy/ in a few days as it is more relevant.
Maria Sierra says
Hi am I allowed to receive a bonus at work in the form of vouchers? I only ask because my boss knows about me going bankrupt and wants me to be able to keep my hard earned bonus. I think it’s nice of him to do.
Sara (Debt Camel) says
Have you been discharged? Are you paying an IPA? How large is the bonus?
Maria Sierra says
I haven’t applied yet for bankruptcy. Getting all my ducks in a row.
If I get the full bonus it’ll be £3100 before tax.
I asked him not to be paid it if I get it December.
Sara (Debt Camel) says
Realistically the OR wouldn’t care about £50 of M&S vouchers at Christmas, but that is a lot. It doesn’t matter how it’s paid, cash or vouchers, you will have to inform the OR as you will not have been discharged in December and the OR is VERY likely to claim the money.
Your alternatives are to shrug and say it’s still best to get your debts sorted in bankruptcy now even if you lose this bonus or to postpone bankruptcy until December, get the bonus, use some of it to buy absolutely essential items around the house and the rest to pay your bankruptcy fees.
Of course if you hope to get a bonus in December 2020, if you put off going bankrupt until early 2020, that bonus would go to the OR.
I think you should talk to a debt adviser about your situation – whether bankruptcy is the right choice (it may well be but this is ALWAYS worth checking with an expert who may spot something you don’t) and if so the timing.
Robin says
My daughter has asked me whether I can act a guarantor for her. I was bankrupt in 2013 and discharged the following year in 2014.
Sara (Debt Camel) says
is this for a tenancy? a guarantor loan? something else?
Farrokh says
Hi Sara,
Does Bankruptcy affect your car insurance price? I have gotten quotes and so far they are a lot higher than last year, even though I now have a drive and a year of no claims bonus. My insurance runs out on march 22nd and my discharge is 16th April. Is it worth waiting for my discharge and making do without a car? Will the quotes even go down after my discharge?
Thank you
Farrokh
Sara (Debt Camel) says
Insurers will be aware of your bankruptcy from your credit file, and this may make it harder to get a good quote.
If you pay for your insurance by monthly instalments and it is more than £500, you’ll have to tell the insurance company about your bankruptcy until you have been discharged. If you can wait until after your discharge, you only need to tell your insurer about the bankruptcy if they ask.
Have you tried talking to a broker? They may be able to talk about your options and how much difference waiting would make.
Peter says
Hi Sara,
I’m wondering what happens to the property that was reported in bankruptcy if OR doesn’t sell it on time to discharge? I know that home will be returned if it wasn’t sold within three years, but what about the rest? For example, a car or a second house (to make it harder it can be abroad)? What happens if OR doesn’t sell them? Who becomes the owner of these things after discharge? Do they come back or does OR transmit them somewhere (but where)?
I can not find the answer to this question, I will be very grateful for any info.
Thanks a lot Sara for everything what you are doing for us.
Sara (Debt Camel) says
The OR is the owner of these things, they do not have to be sold within the 12 months, they do not transfer back to be owned by the bankrupt. A car normally would be. A second home, especially abroad, may take longer. If you want someone can make an offer to the OR to buy back an item.
If you are already bankrupt, I suggest you talk to the OR about what will happen. Shutting your eyes and hoping the OR forgets will not usually work out well, it is better to know and to be able to plan.
If you are thinking of bankruptcy, talk through any possessions which you are concerned about with a debt adviser before submitting your application.
ZB says
Hi Sara,
I was made bankrupt last year (April 2018). At the time, I needed to (& was very fortunate enough to be able to) stop work & live with family.
I do remember on the online bankruptcy forms they asked abt earnings (which I said where £0) & again in my call with the OR I informed them I was unemployed. Therefore an IPA was never even discussed.
As I have heard nothing from the OR since, I think (from reading above) I am safe in assuming I will be discharged this month. If I begin working again (which I hope to do soon, in a month or so), will I need to tell the OR? Could I be given an IPA after discharge?
Many thanks for all of your advice.
Sara (Debt Camel) says
unless there is something very unusual in your case, which you would have heard about, you will be discharged after a year. If no IPA has been set up by then, one can’t be afterwards. And with no IOA in place after discharge you don’t have to tell the OR if you get a job.