Worried about CCJs? You need to know about this letter
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Bankruptcy has lots of complicated terms associated with it, but here’s one you won’t have to wonder about anymore.
If you’re familiar with bankruptcy, you may have come across the term undischarged bankrupt, but what does it actually mean?
It’s a legal term which is used to describe someone who has been made bankrupt, but has not yet reached the end of the bankruptcy period. When you are made bankrupt, the usual amount of time it lasts is one year. During this time, while you are in bankruptcy and the restrictions related to that are still being applied to you, you are known as an undischarged bankrupt.
When you’re an undischarged bankrupt you may also need to make monthly payments, known as an Income Payments Agreement (IPA), to your trustee – that’s the person who deals with your bankruptcy. Part of these payments will go to your lenders to pay off what’s owed. These can last up to three years, so you will continue to pay them even when you’ve become a discharged bankrupt.
You stop being an undischarged bankrupt when one year has passed, as long as you’ve kept to the terms of the bankruptcy. When this point is reached, the courts will discharge you from any remaining debts. There are some occasions when you will not be discharged after one year, but there has to be good reason for it.
What happens once you become an undischarged bankrupt?
Once you become an undischarged bankrupt, you are discharged from your debts. This means you are no longer expected to pay anything more towards them, unless you are paying an IPA, as we mentioned earlier. There are some other debts that cannot be discharged – these are:
• Money you owe because of family court proceedings
• Court fines
• Debts that have come about because of crimes, including fraud
• Debts that came about after the bankruptcy order was made
• Student loans
Bankruptcy can involve the sale of some of your assets, but once you're discharged, lenders have no claim on any new assets you buy. However, if you had any assets, and they were claimed by your trustee while you were still an undischarged bankrupt, they will remain under the control of the trustee and can still be sold
The Insolvency Register (IR)
When you are an undischarged bankrupt, your details appear on the Insolvency Register. Once you are discharged from your bankruptcy, your details will remain available on the IR for a further three months and then they will be removed. However, your bankruptcy could still affect any further borrowing you may want to take out, as it’ll remain on your credit file for six years from the day it started.
It’s also possible that even after the six years is up, and the bankruptcy has disappeared from your credit file, you will be asked if you’ve ever been bankrupt. This can happen when you are applying for a mortgage, for example and, of course, you must always answer honestly in this situation.
Bankruptcy is only one of a number of debt solutions available and deciding which one is best for you depends on your circumstances. If you think you may need a debt solution to deal with your problem debt, it is best you speak to a trained advisor. They’ll go through your current financial situation and advise you on the best way forward. You can speak to one of our advisors by choosing one of the ‘contact us’ buttons on the left of the page.
It’s also worth noting that all debt solutions have pros and cons. Bankruptcy does allow you to deal with your problem debts, which eases your money worries. However, as we mentioned earlier, it will have a negative impact on your credit score, which can make borrowing more expensive or difficult in the future.
by Shelley BowersBack to blog home