Discharge from Bankruptcy
- 15 Dec 2021
Discharge from bankruptcy usually happens automatically after 12 months. You are then no longer a bankrupt person.
- What does discharge from bankruptcy mean?
- Can your Discharge be suspended?
- What if you have an IPA?
- When will your credit rating improve?
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What does Discharge from Bankruptcy mean?
Discharge from bankruptcy means that you are no longer bankrupt. You are released from the restrictions you were under during your bankruptcy.
For example you can now become a Company Director if you wish. You can also borrow more than £500 without telling the lender you are Bankrupt. In addition most winfalls you receive are yours to keep.
Three months after your discharge your name and details are taken off the Insolvency Register. After this if you want written confirmation of your discharge date you will need to contact the Insolvency Service.
Discharge from bankruptcy happens automatically. You will not receive any written notice from the Official Receiver.
Can your Discharge be Suspended?
Bankruptcy usually lasts 1 year. Most people are discharged 12 months after the start date. However it is possible for the Official Receiver (OR) to apply to the Court for discharge to be suspended. If this happens you remain bankrupt past the normal 12 months.
The OR will only ever request the suspension of discharge in rare occasions. It will only happen if they believe you are not cooperating with their investigation of your financial affairs.
You may be deemed to be uncooperative if you withold information that the OR asks for or try to hide assets. In addition a discharge date may be suspended if you totally ignor their attemptes to contact you.
A suspension of your discharge will be lifted once you start cooperating with the OR and they are able to complete their investigation of your affairs.
What if you have an Income Payment Agreement?
An IPA (Income Payment Agreement) means you are required to pay your disposable income to the Official Receiver. The Agreement lasts for 3 years.
The fact that such an Agreement has been put in place does not change the date of your discharge. It will still be 12 months from the day you went bankrupt. However if an IPA is in place by this date you must continue paying it for the full 36 months.
If your financial circumstances change during an IPA you must inform the Official Receiver within 21 days. This is the case as long as the Agreement remains in place regardless of whether you are already discharged or not.
If you have no IPA in place by the date of your discharge the Official Receiver can no longer ask you to accept one even if your income subsequently goes up.
After Discharge from Bankruptcy when does your Credit Rating improve?
A record of your bankrupty remains on your credit file for 6 years from the start date. This is regardless of the date of discharge. As such it is common for your credit rating to remain poor for a considerable time after you are discharged.
Having said that once you are discharged there are various things that you can do to improve your credit score. These include remedying credit file errors and starting to use a credit repair credit card.
It may be possible for you to get a mortgage after you are discharged before the record comes off your credit file. However you will need to use a specialist broker.