What is Bankruptcy?

What does bankruptcy actually mean? Is it the same as Insolvency?

Bankruptcy means that your financial affairs are administered by an Official Receiver or a Trustee appointed at the Creditors meeting or otherwise. In other words, he controls all that you own including your house. He also administers all that you owe. Essentially, his duty is to sell all your permitted assets (this can include your home contents, primarily those of high value) and use the money to pay as much as possible to your various Creditors, that is the people that you owe money to.

What is the Difference Between Insolvency And Bankruptcy ?

Is there a difference between the two? There is a significant  difference - insolvency  is described as either having more debts than assets or the prefered definition is  not being able to pay your debts as they fall due

Bankruptcy  is the state you're in after the Judge has made a bankruptcy order against you. You have to be insolvent to be made bankrupt but you do not have to be bankrupt to be insolvent.

What does Bankruptcy mean to your life ?

• You lose actual control of your assets but retain day to day control subject to the Offical Receivers direction.
• You cannot obtain credit for over £500 without telling the proposed lender that you are an undischarged Bankrupt
• You cannot act as a company director but you can act as company secretary to a private company. 
• You cannot take any part in the promotion, formation or management of a limited company (LTD) or limited liability partnership (LLP) without the permission of the court.
• You cannot trade in any business under any name other than your own unless you inform all persons concerned of the bankruptcy.
• You may find it difficult to  practice as a Charted Accountant or a Lawyer.
• You may not act as a Justice of the peace (JP).
• You may not become a member of parliament.
• You may not become a member of a local authority. .
• Your financial affairs may be publicly examined in court but in practical terms only if there are suspicious circumstances.

What are the advantages of bankruptcy?

For you: The letters and phone calls stop almost overnight. Your household goods and chattles are protected from seizer by your creditors and you get breathing space to take stock of the situation. Also a clean break can bring  peace of mind after what is undoubtably a stressful time beforehand.
For your creditors: Knowledge that your financial affairs have been thoroughly looked into and the situation is as it is.