Already Bankrupt
- 08 Dec 2021
You may be already bankrupt. Alternatively you may have already been discharged. There are however some aspects of the procedure which still affect you.
Included in this article:
- Receipt of a windfall during bankruptcy
- Get a mortgage after bankruptcy
- Can you add debt if you are already bankrupt
- Improve your credit rating after bankruptcy
What if you receive a Windfall if you are already bankrupt?
If you recieve a windfall (normally a cash lump sum) while you are bankrupt it must be paid to the Official Receiver (OR). This includes things such as an inheritance and most compensation payments.
You are not normally allowed to retain any of the money you receive. In cases of particular hardship the OR can decide to let you keep some if they feel it is reasonable to do so. However this is rare.
Most windfalls received after you are discharged are yours to keep. However there are certain things which still have to be handed to the OR because they are unrealised asssets. This includes PPI compensation.
PPI Compensation is normally classed as an unrealised asset of bankruptcy. As such it has to be paid to the Official Receiver even after discharge.
Can you get a Mortgage after Bankruptcy?
Once you have been discharged it is possible to get a mortgage. The record does not have to be off your credit file but the longer you wait the more options you will have.
It will be difficult to get a mortgage until at least 3 years from the start of your bankruptcy. After this period of time the options open up but you will still need to put down a deposit of at least 25% of the value of the property.
The best options will become available 6 years from the start date. This is when the record comes off your file and some high street lenders may then be willing to consider you.
Contact us if you are discharged from bankruptcy and looking for a mortgage. We can put you in contact with a specialist broker.
Can you add a Debt if you are already bankrupt?
All unsecured debt that you owe at the time you go Bankrupt is included. This is the case whether you were aware that you owed it or not.
As such if you forget to include a debt on your original application or a new debt appears that you were not previously aware of it does not matter. Once it comes to light it is automatically included in the original procedure.
Under section 382 of the Insolvency Act (1986) bankruptcy includes any debt or liability you are subject to or may become subject to on the date you become Bankrupt.
A mortgage shortfall is included in bankruptcy even if the debt does not crystalise until after the start date or even after the date of discharge.
Improving your Credit Rating after Bankruptcy
Going bankrupt seriously affects your credit rating. A record of the procedure remains on your credit file for 6 years from the start date. It will be very hard for you to get new lines of credit during this period.
This means that your credit rating will remain poor for a considerable time after you are discharged. However there are certain things you can do to start improving it before the record drops off your file.
Firstly you can checking whether there are any date errors on your credit file. If so these can be changed. In addition using a credit repair credit card will allow you to start building a history of responsible credit usage.