Bankruptcy

When a debtor is made bankrupt they enter into bankruptcy for a period of 12 months, although it remains on the debtor’s credit file for a further five years (six years  in total).  If a debtor deliberately gave away assets or knowingly borrowed money they couldn’t pay back, they may have a Bankruptcy Restriction Order placed against them, making the bankruptcy term longer.  In serious cases a debtor may also face criminal charges, although this is rare.  

Should you make your debtor bankrupt?

When a debtor is bankrupt they cannot be a director of a limited company and if their income is high, they could be made to pay some money back.  But there is no point making a debtor bankrupt if they do not have any assets.  It is fairly costly and if you know you’re not going to get any money back it would perhaps bring some satisfaction.  However, if you know the debtor has assets it could be an option worth considering.

You cannot issue proceedings on a debtor if there is a dispute on the debt and you would need to prove the debt before making someone bankrupt.  This is done by serving a statutory demand, or it can also be done by way of enforcing a county court judgment.