What are the exemptions for Bankrupt people in UK

If possible, people should avoid bankruptcy, as it can have several negative effects on one’s financial life. The decision of going bankrupt should be taken after much contemplation and after professional counselling. If a professional is able to suggest different alternatives, one needs to think on those alternatives seriously, because following bankruptcy, the debtor can lose their all assets and valuables. A debtor can lose his personal house, vehicles as well as bank accounts. Only tools and vehicles for performing any trade can be exempted.

In fact, you can have various options that can relieve you from your financial liabilities. In many cases, you may have not to apply for bankruptcy. Thus, before trying the bankruptcy measure, you need to make sure if bankruptcy is right for you.

In fact, bankruptcy laws used to be harsher in the past and filing for bankruptcy meant generally losing everything at that time. But with the introduction of new bankruptcy laws, a debtor started getting several reasons to get their assets such as house, cars and other personal belongings excluded from the bankruptcy estate.

So today, even after being declared bankrupt, you can enjoy several types of exemptions and can own assets too. To understand how to avail those exemptions, you may need guidance from a professional.

The exemptions that someone can avail are subject to specific case of an individual and it depends from person to person. Generally, these exemptions can include:
A bankrupt’s house.
A bankrupt’s car with value less than £2000.
Any tools used for the trade.
In some cases of bankruptcy exemptions, your assets are subject to an agreement with the creditors. This new law allows you to repay some parts of your debt to your creditors and a time period of 3 to 5 years is allowed to repay your full amount to your creditors. However, this process is very complex and there are so many factors that are taken into account while entering into such an agreement with the creditors. The debtor’s financial liabilities and incomes are also important factors to be considered for exemptions.

Claiming Exemptions

The exemption process needs to be initiated in parallel when you file for bankruptcy. At the time of filing your bankruptcy petition, you need to include a list of all your assets that you want to be exempted from being forfeited. The list should consist of:
A report of all items you are trying to claim for exemption.
The particular law that can justify each exemption .
The market value of all items you are trying to claim for exemption.
Once you submit your list, the bankruptcy court, the trustee in bankruptcy and all creditors will start evaluating your case. The creditors or the trustee in bankruptcy may raise an objection against your list of exemptions. This objection should be raised within 30 days following the meeting of your creditors. Known as 341 meeting, it takes place soon after you file your bankruptcy petition.
Creditors can raise objection against any of your assets to be exempted or included in the list of property exempts. But the creditor(s) raising the objection will have to prove why a particular asset should not be exempted. If no objection is raised against your assets listed for exemption, the assets will be considered for exemption and will be excluded from the bankruptcy estate. In that case, the exempted assets can’t be sold by the trustee to raise money to pay off to the creditors. However, your all assets cannot be exempted in any circumstances. Some of your assets may be transferred to the trustee in bankruptcy who can go on to sell those assets to pay off your debts.

Bankruptcy is often seen as a means to allow you to make a fresh start. In bankruptcy, a large proportion of your debts are discharged or you are allowed time to pay them off according to your income and budget. If you lose everything, you won’t be able to bring your finances back on track. That’s why the exemption clause has been included, allowing the bankrupt to retain some basic assets that are essential to lead a comfortable life and perform his or her jobs. According to the Bankruptcy Code, these basic needs create grounds for your property exemptions. This has done to ensure that not everything has been taken by your creditors. So, as a bankrupt, you are entitled to get certain exemptions and keep your essential properties safe.

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