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07/10/2020

What is an undischarged bankruptcy?

07/10/2020

What is an undischarged bankruptcy?

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If you’re struggling with debt and looking into bankruptcy as an option for debt relief, you may have come across the term ‘undischarged bankruptcy’ – a legal term for bankruptcy that remains ongoing.

Read on to find out exactly what an undischarged bankruptcy is, how long it takes to be discharged from bankruptcy, and what being discharged from bankruptcy would mean for you.

What does undischarged bankruptcy mean?

An ‘undischarged bankruptcy’ simply means a bankruptcy that is still in progress. If you are an ‘undischarged bankrupt’ then your bankruptcy is ongoing, meaning you remain subject to the payments and restrictions that go along with the bankruptcy process.

The most obvious consequence of an undischarged bankruptcy is the payments. For as long as your bankruptcy remains ongoing, you will be expected to pay a pre-agreed amount of money towards your debts each month.

As an undischarged bankrupt, you might work with a trustee who helps you negotiate the bankruptcy process. If that’s the case, you will be expected to send your monthly payments to the trustee. It will then be up to them to divide a portion of those payments among your creditors.

As well as monthly payments, there are other restrictions placed on undischarged bankrupts, mostly concerning what you can and can’t spend money on, which of your assets you will be able to keep, and which you will be forced to sell in order to pay money towards your debts.

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How long does a bankruptcy take to discharge?

A standard bankruptcy in the UK takes one year to discharge. In normal circumstances, you will pay money each month towards your total debts for a period of 12 months, and be discharged from your bankruptcy on the one year anniversary of the date it began.

Once you have been discharged from bankruptcy, you will be free of the obligation to pay any remaining debts, and any restrictions imposed by the bankruptcy process will be lifted.

There are some circumstances in which you might not be discharged from your bankruptcy after one year. This is called a ‘delayed discharge’ and is usually the result of a major infraction, like failure to comply with the official receiver who handles your bankruptcy.

Delayed discharge is not typical, but if you find yourself in the position where your bankruptcy is extended, you will be told why the action has been taken, and given the steps you need to take to ensure your successful discharge.

Does a bankruptcy automatically come off?

You don’t have to take any direct action in order to be discharged from your bankruptcy.

As long as you have kept up with your payments and operated within the restrictions of your bankruptcy, you will be discharged from it automatically, usually after one year.

Can undischarged bankrupts leave the country?

If your bankruptcy is still in progress, it is possible for you to leave the country. There are no specific restrictions on travel for undischarged bankrupts in Scotland, England, or Wales.

Provided you are based in one of the above countries, and the country you are travelling to has no objections, you will be free to travel during the bankruptcy process, so long as it doesn’t impact your ability to keep up with payments or comply with other restrictions.

Things work slightly differently in Northern Ireland, however. You will need to contact the official receiver who handles your bankruptcy if you are planning a trip overseas, and obtain the ‘leave of the court’ in order to travel.

As well as obtaining the leave of the court, there are some more specific travel restrictions that apply to undischarged bankrupts based in Northern Ireland. You can read about them here.

What happens when you’re ‘discharged’ from bankruptcy?

When you are discharged from bankruptcy, you are effectively being discharged from your debts. Any debt remaining at the end of your bankruptcy – which usually lasts one year – will be written off.

Any restrictions associated with your bankruptcy will also be lifted once you have been discharged, so you will largely be free to get on with your life.

An important thing to note is that, if you have been making payments via an Income Payments Agreement , you may be asked to continue to make these payments for up to three years after you have been discharged.

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Can debt collectors try to collect after a discharge?

After you have been discharged from bankruptcy, you will be free of most of your remaining debts, however there are some exceptions. Certain debts cannot be discharged and will stay with you after your bankruptcy.

If you owe money in court fines or for family court proceedings, have debts associated with crime, debts that originated before you entered into bankruptcy, or have outstanding student loans, you may still be asked to settle those debts after you have been discharged.

While any assets claimed while your bankruptcy was still in progress will remain within the control of the trustee and may subsequently be sold, creditors will have no claim to any assets you acquire from the minute you are discharged from bankruptcy.

How to get proof you’ve been discharged

Once you are discharged from bankruptcy, it’s a good idea to get some form of official proof to demonstrate that fact.

Because your discharge will happen automatically, you probably won’t have proof sent to you, so you may have to be proactive in obtaining proof of your discharge.

You can ask the Insolvency Service for a confirmation letter once your discharge date has passed, by emailing discharge.queries@insolvency.gov.uk.

Confirmation letters are free of charge, and you must make sure you include your:

  • Name
  • Date of birth
  • Current address and previous addresses
  • National Insurance Number
  • Court reference number

While a confirmation letter gives you a general proof of discharge, you will need a more specific proof of discharge to do certain things after your bankruptcy has ended. If you’re applying for a mortgage, for example, you’ll need a ‘Certificate of Discharge’, which costs £70.

Getting public records changed after being discharged

When you agree to undertake bankruptcy, this will be reflected in public records in several places. Once you have been discharged, you may want to make sure those public records are updated.

While some public records will be updated automatically to include your new status, you may have to take action to update others yourself.

Three months after your discharge from bankruptcy, you will automatically be removed from the Insolvency Register, but your bankruptcy may well have an impact on your ability to borrow for much longer.

You can contact credit reference agencies in order to have them update your file, for example, but while you will no longer be listed as an undischarged bankrupt, evidence of the bankruptcy will remain on your file for six years from when your bankruptcy order first went through.

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