How long does Bankruptcy last?
Having said that some affects of bankruptcy will last for longer than 12 months. These include the length of time your credit rating is affected and how long you have to make payments towards your debts.
Can Bankruptcy last longer than 12 months?
It is possible that your Bankruptcy could be extended past 12 months. If the Official Receiver (OR) believes you are not co-operating with them they can impose a Bankruptcy Restrictions Undertaking (BRU). This would extend the restrictions you are under from 12 months to 2 or more years.
However extensions of this kind are extremely rare. The Official Receiver will only issue a BRU if they feel that you have tried to hide assets or income from them. Alternatively it could happen if you paid off a creditor preferentially before you went Bankrupt.
BE Tip: Your Bankruptcy will not be extended simply because you have borrowed money you are now unable to repay. This may have been unwise but you will not be penalised for it. Equally you will not get a BRU if you have gambling debt.
Can Bankruptcy last less than 12 months?
In the past the Official Receiver was allowed to grant early discharge from Bankruptcy. If you had no significant assets and could not make any payment towards your debts there would be little point in you remaining bankrupt.
Under section 279(2) of the insolvency Act 1986 the Official Receiver could then file a notice at the Court. This would state that an investigation of your conduct and affairs had been concluded and no further action was necessary. You would then be discharged.
However this option was taken away in October 2013 with the introduction of the Enterprise and Regulatory Reform Act. As a result of this the OR can no longer grant an early discharge from bankruptcy for any reason. Bankruptcy will now always last for a minimum of 12 months.
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How long will Bankruptcy Income Payments last?
Once you are bankrupt the Official Receiver will decide if you can afford to make a monthly payment towards your debts. If you can you will be required to start an Income Payment Agreement (IPA). The payments you make under this agreement last for 3 years.
An Income Payment Agreement runs totally separately to your bankruptcy. As such you will still be discharged from bankruptcy after 12 months even if you have an IPA. However you still have to continue paying these until the Agreement is finished.
BE Tip: An IPA can be set up at any time during the 12 months you are Bankrupt. It may be that you could not afford to make payments at the beginning. However if your financial situation improves you will be asked to start an IPA from that point. It will then last for 3 years.
If an IPA has not been set up by the time you are discharged you can not then be asked to start paying one. This is the case even if your financial circumstances improve at a later date.
How long will my Credit Rating be affected by Bankruptcy?
The record of your bankruptcy will remain on your credit file for a statutory period of six years. This is from the date you go Bankrupt. This means that even after you are discharged after 12 months the record will remain on your credit file for a further 5 years.
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