I became registered bankruptcy trustee some years ago and expected the work to be almost identical to what I had been doing in my corporate insolvency practice.
Although there are very many similarities between corporate insolvency and personal insolvency, the one difference that stands out is that in providing insolvency advise we must consider the individual much more than is the case with the inanimate company and its attached assets and liabilities.
Frequently we are asked to provide advice regarding whether a client should make himself or herself bankrupt. Typically the client is very reluctant to take this admittedly big step, even although their financial profile and prospects are grim in the extreme. Often the reluctance stems from an admirable desire not to “take the easy way out” ,or from a commitment to “do the right thing” by the creditors. Also of course many clients are mortified by the thought of becoming an undercharged bankrupt.
Yet, when we objectively consider the clients position the only advice that we can give is to “lodge a debtor’s petitioning and make yourself bankrupt”. Although clients might find the advice unpalatable they usually are persuaded by a combination of the following observations which we pass on:
- Bankruptcy exists to help people who simply can no longer cope financially. You are in that position. By making yourself bankrupt you are not misusing the system, rather you are taking advantage of the protection which the legislation is designed to provide. Bankruptcy exists to help with recovery, not to punish for risks gone wrong.
- There is nothing to stop you paying one or more creditors at any time during or after the bankruptcy. Take as long as you like…twenty years if you want. But remember that you are no longer legally obliged to pay anyone.
- It is possible to propose an arrangement with your creditors under Section 73, at anytime during the bankruptcy. Lodge a debtor’s petition and give yourself a breathing space of few months to consider whether a section 73 proposal is beneficial. If a section 73 proposal is accepted by the creditors the bankruptcy is annulled. That is, it is taken as never having occurred.
- Almost certainly you and your family are suffering enormous stress. We have been told by others in your position that bankruptcy provides enormous relief and a marked improvement in the quality of life. Don’t delay the inevitable.
- Although there is a register of folk who become bankrupt, the trustee only contacts those who need to know. This is usually limited to creditors. Unless your employment contract requires it, there is usually no need for your employer to be told of the bankruptcy. The trustees does not publish any notice about the bankruptcy.