Bankruptcy Information

Where does the word Bankruptcy originate from?

One version states that the word bankruptcy was formed from the ancient Latin bancus (meaning a bench or a table) and ruptus (meaning broken). In ancient Greece the first bankers worked in public places such as fairs and markets. They used their bench to write their bills of exchange and for general dealings with money. If the banker then failed in his business he broke the bench to indicate to the public that he was no longer in business. This was a common practice in Italy as well with the Italian term for this being Banco Rotto.

Bankruptcy in the United Kingdom

In the United Kingdom the term bankruptcy normally relates to individuals although it can cover both business and personal debts. The term bankruptcy is often used when the press talk about large companies that are in trouble however strictly speaking this is incorrect. In the case of a Limited Company the individual is protected to a certain degree and debts would be dealt with by way of liquidation or administration.

When the individual/s have given  personal guarantees it does not matter if the debt was in relation to a Limited company or not, they are personally liable for the debt and will be dealt with in the normal manner.

Insolvency is a term much used nowadays and covers more than one method of dealing with your debts. When you owe more than £15,000 you may consider either Bankruptcy or an IVA (Individual Voluntary Arrangement).

It is essential to take expert advice before entering into either of these debt solutions. The Insolvency statistics that are released every 3 months via the Insolvency Service cover both Bankruptcies and IVA agreements.

In Scottish law bankruptcy is referred to as sequestration and is administered by specialist firms as the laws are different to the bankruptcy laws that cover England, Wales and Northern Ireland.

In 2004 the Government changed the laws in relation to the duration of bankruptcy. The standard term of Bankruptcy is now 12 months where previously the minimum was 3 years.

 In many situations where the Official Receiver deems that the case has been investigated fully and no further action is to be taken, the Insolvency Service will offer the person in bankruptcy an “early discharge”. This means that your bankruptcy may last for less than the 12 months and a common timescale is around 8 to 9 months. Once you are discharged from bankruptcy you are then back to normal (unless you have had a payment order or a bankruptcy restriction order applied) and need to look at rebuilding your credit profile.