Bankruptcy in different states of UK

In the United Kingdom, there is no singular law for bankruptcy that is applicable uniformly throughout the nation. In fact, there are three parallel systems in UK. One is applicable on England and Wales, the other one is meant for Northern Ireland while there is a separate bankruptcy law for Scotland.

Bankruptcy in England and Wales

The Part IX of the Insolvency Act 1986 governs the bankruptcy system prevailing in England and Wales. The bankruptcy law here is applicable on individuals only and companies and other legitimate organizations are beyond its purview.

An individual can be held bankrupt by a court order only after a bankruptcy petition is filed in the court and heard by the judges. This bankruptcy petition can be filed by the individual himself, in case he finds himself not in a position to pay off his outstanding debts. Or, his creditors may also file a bankruptcy petition to declare a person bankrupt and recover the money from him through the court’s intervention. Before moving to the court with a bankruptcy petition, the creditor need to make a statutory demand before the debtor asking to clear the outstanding debt within 21 days of serving this notice. This demand should be made in the prescribed form only. The debtor may approach the court against this statutory demand, citing disputes on the claimed amount or on the basis of some other grounds. If debtor’s plea is dismissed by the court and he fails to pay the claimed amount, the creditor may seek court’s intervention to declare the debtor as a bankrupt.

A creditor may file the bankruptcy petition without serving a statutory demand as well, in case an execution on an earlier judgment has already failed. In either case, the outstanding amount should be at least £750.

A bankruptcy petition is usually served in-person to the debtor, but if he tries to evade the court proceedings, the notice can be served by post or by any other means which can bring the bankruptcy petition to the debtor's attention. The court can give several distinct types of verdicts on the bankruptcy petition. It can dismiss the petition finding some dispute in the debt, may adjourn the petition and allow a stipulated time period to the debtor to pay the amount or can declare the debtor bankrupt.

When a person is declared bankrupt by the court, then a trustee is appointed to administer the bankruptcy matters. The trustee must be an Official Receiver or a certified insolvency practitioner appointed by the court. The bankrupt's assets come under the authority of the trustee who can sell them to pay off the outstanding amount of the creditors.

Bankruptcy in Scotland

In Scotland, there is a separate term for bankruptcy called Sequestration. The sequestration process in Scotland is administered by the organisation called the Accountant in Bankruptcy. The Scottish Government however runs a Debt Arrangement Scheme that helps individuals to deal with debt and bankruptcy related problems. These schemes are seen as alternatives to bankruptcy in Scotland. Other alternatives to bankruptcy include Trust Deeds, which are a sort of agreement brokered between the debtor and his creditors. In Scotland, a citizen can seek free professional advice on debt matters from organisations such as Citizens Advice Scotland.

Bankruptcy Law in Ireland

In Ireland, the bankruptcy laws are based on the Bankruptcy Act of 1988 and most people consider it as an outdated law, requiring urgent amendments. In Ireland, as per the current laws, if a person is declared bankrupt, his bankruptcy will go on for a period of twelve years while in England, the bankruptcy lasts for twelve months only. This is the reason a large number of people try to relocate to England when it comes to file a bankruptcy petition. In Ireland, a bankruptcy is relatively costlier for both the debtors as well as the creditors. It is much cheaper in England and people love to avail the bankruptcy advantages of the England’s jurisdictions.

In Ireland, before considering bankruptcy options, a debtor may approach Money Advice and Budgeting Service (MABS) seeking advice and guidance on debt issues. The MABS comes under the Department of Social and Family Affairs of Ireland and is very popular for getting free and confidential advices to avoid bankruptcy and settle debts.

Unlike in England and Wales, the Irish Laws do not allow a debtor to go for an IVA (individual voluntary arrangements). In IVA, an insolvency practitioner assesses the assets of the debtor and an arrangement is organised between the debtor and his creditors.

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