What happens after you are discharged from bankruptcy?
The day you're discharged from bankruptcy is a new start, all the debts you took into bankruptcy will be gone and you're free to start afresh, but what happens next? Here's how to start getting your finances back on track.
Once you've been discharged you'll no longer be bound by the restrictions of your bankruptcy order, but unfortunately, that's doesn't mean all your finances will go back to normal straight away.
How do you get discharged?
You'll usually be discharged from your bankruptcy order after 12 months, provided you haven't behaved irresponsibly. If you've not co-operated during your bankruptcy, it could last much longer than a year.
Discharge will usually happen automatically on the anniversary of your bankruptcy. You won't be sent any confirmation, but you can get proof by asking the official receiver for a confirmation letter, or by asking the court for a Certificate of Discharge (there is a £70 fee for this).
What can make your bankruptcy last longer?
If you are dishonest in your dealings with the Official Receiver or Trustee, or you are to blame for your debts, there is always the option for him or her to apply to the court for a bankruptcy restrictions order.
This will extend the period of your bankruptcy conditions to between two and 15 years - so always be honest with your Trustee or Official Receiver at all stages.
For more information check out our guide on declaring yourself bankrupt.
How to declare yourself bankrupt
What changes once you've been discharged?
The good news is that once you've been discharged you'll be free of some of the financial limitations imposed by the bankruptcy order.
What goes back to normal?
Once you have been discharged there are two main things that will return to normal:
You'll be able to act as a company director again unless there is another reason why you have been disqualified from holding that position.
Any assets you gain after you have been discharged will be your own, and can't be used to pay creditors under the existing bankruptcy.
There may be a period of time between when the Official Receiver or Trustee has finished dealing with the inquiries into your case, but not yet discharged your bankruptcy - anything obtained during this period can still be used by the Official Receiver or Trustee to pay your creditors.
What will still be affected?
Unfortunately not everything will return to normal:
A bankruptcy will affect your credit rating for at least 6 years. So your credit score will be very poor, and you'll be unlikely to find it easy to get credit, even after you're discharged.
Your assets from when you were made bankrupt still remain under the control of the Official Receiver or Trustee, and they can be dealt with at any time in the future. So even if you still have them in your possession, they cannot be considered 'yours'.
If the Official Receiver or Trustee obtains a charging order over the interest in your house - which can be done providing you own more than £1,000 of its value - this will remain in place for up to three years. So if your bankruptcy is discharged within a year, this charging order will remain.
If you are making payments into your bankruptcy fund from your wages through an Income Payments Order - which is also in place for three years - you may have to continue these for up to three years, even if your bankruptcy has been discharged before this time.
If any debts arose from fraudulent activity, they cannot be dealt with under a bankruptcy order. If you are paying personal injury damages, these would have to continue until the court determines that you can be released from doing so.
What to do after bankruptcy
After you've been discharged from bankruptcy it's important you don't fall into debt again and get your finances straight.
A good way to start is to budget your money carefully so you don't spend money you don't have. Our guide on How To Write A Budget is a good place to start!