Not debt free after Bankruptcy


Apologies if this has been covered elswhere but I am due to opt for bankrupcy after strugggling like many others with debt.

I was alarmed to hear from a friend who went bankrupt 10 years ago owing 100k and has since managed to get back on his feet after losing his house etc.

The alarm comes from the fact that he has been sent a letter requesting that he must sell his new house to cover the old debts, due to a change in the law last year, which means you can still be expected to pay the old debts once you are back on your feet.

With the equity in his new house, he has been told to pay £80k for his old debts.

The firm sending the letter seem to be a company exploiting the change in the law and making money by collecting the old debts for the creditors who thought they would get little or nothing.

Having checked with his solicitor he was advised that he has no choice but to pay or sell his house!!

If someone has any information about this please advise. URGENTLY!!



  • The solicitor is erroneous in his findings, thoughts spring to mind that perhaps the solicitor is "in the pocket" of the company concerned, although highly unlikely! Such things are very possible though.

    The company concerned may very well be cowboys.

    Please refer to my complete answer in your other thread.

    Best of luck to you.
  • jen_jen_2
    jen_jen_2 Posts: 1,032 Forumite
    from what you have written it is not possible what is possible is..(in England)

    if you went bankrupt and there was negative or little equity in the house the OR could revisit it and ask you to sell it at a later date because the asset - the house became property of the OR when you went bankrupt.

    now, the new law says that the OR has to do something with any asset - the house within 3 years of date of bankruptcy and the new rules are also putting a deadine on all previous bankruptcies (not sure but 99% sure OR will have to do something by April 07 - 3 years after rule change) to bring them into line.

    so if your friend when brupt and lost his house at the time, and none of his new house was an asset from the bankruptcy then it is not owned by the OR and therefore cannot be taken. Further if he is getting letters from solicitor and not OR or court then they are likely to be scammers, tell him to get advice from CAB or other relvant organisation.

    Hope this is clear and helps
    Ready to Go Go!
  • Hi Guys,

    Thanks for your replies.

    The Solicitor is his family solicitor and completely sepereate from the collecting agent. His new assets are completely unrelated to the original bankruptcy as he was left with virtually nothing when it happened.

    I posted some questions to some other sites and they seem to confirm that this IS perfectly legal and legitimate since the change in the law last year.

    One reply from a firm of solicitors stated:

    With regard to your email, due to a change in bankruptcy law last year, if you go bankrupt the Official Receiver (OR) can check up to 10 years from the date of the bankruptcy, whether you have any assets that can help pay in to the bankruptcy. For example, if your friend owed £100k and had a property, this would obviously go in bankruptcy in order for the creditors to get some of the money back, although only a small amount what with fees etc. If he now has another property the OR can come to see if he has any equity which can be realised now in order to get more money to the creditors who wrote off the debt he owed. This can happen up to 10 years later.

    Please advise as we seem to have a difference of opinion here.

  • pug_in_a_bed
    pug_in_a_bed Posts: 1,975 Forumite
    So let me see if i've got this: the inidivual purchased a home after the bankrutcy, which they did not have as a saleable asset at the time they declared, and now the debts are effectively being called in?

    oh my lord this is really worrying. I went bankrupt last august and I hope to be discharged this august. I didn't have a bean at the time, and I can't see me having much to show for another 5 or 6 years, as I'm studying. After this time, lets say i got a job at £20, 000, could the OR begin taking payments? This is very confusing and I feel if this was the case, my OR should have informed me - I was very clued up about the process, I did a lot of research, I can't understand why I didn't come across this.
  • jen_jen_2
    jen_jen_2 Posts: 1,032 Forumite
    i would ask to see exactly where the solic is getting this info from, what section of the insolvency rules?

    my info is (new rules) that the OR has 3 years to to deal with the interest in the property failing which it will revert back to the debtor and not able to be used to pay the debts unless the OR sells the property, applies for order for sale, puts a charge on it or comes to another agreement with the debtor.

    and seconldy the transitional rules state that the OR has to do this now with all old bankruptcies within 3 years from April 04 the date of the change.

    one of the reason for the changes is to encourage enterprenurship so people try to make their own businessess and do not suffer from trying, the old rules allowing the OR to revisit assests forever was found to be particularly harsh there was a money box Radio 4 edition before the changes about how people who went brupt in the late 80s when there was negative equity were now facing the consequences of their properties having loads of equity and them having to sell to pay a 20 yr old bankruptcy.

    i will happily admit im wrong if i am but it is one of the big changes that the property has to be done within 3 years so i am very interested in why this solic. says 10.
    Ready to Go Go!
  • jen_jen_2
    jen_jen_2 Posts: 1,032 Forumite
    these are the ammendments made to the law (the new changes) from the government website. I will try to find the origional it refers to and post a link. the first para says "for the period of three years" and my understanding is it is refering to the "vesting of estate" (ownership and dealing of property by the OR). Hope this helps and is not just confusing

    Insertion of new Rule 6.237CA
    42. After Rule 6.237C insert -

    " Vesting of bankrupt's estate - substituted period.
    6.237CA. For the purposes of section 283A(2) for the period of three years set out therein there shall be substituted, where the trustee in bankruptcy has sent notice to the bankrupt that he considers -

    (a) the continued vesting of the property in the bankrupt's estate to be of no benefit to creditors; or

    (b) the re-vesting to the bankrupt will facilitate a more efficient administration of the bankrupt's estate,

    the period of one month from the date of that notice.".

    Amendment to Rule 6.237D
    43. At the end of Rule 6.237D there is inserted -

    " (10) In determining the value of the bankrupt's interest for the purposes of paragraph (6)(c), the court shall disregard that part of the value of the property in which the bankrupt's interest subsists which is equal to the value of -

    (a) any loans secured by mortgage or other charge against the property;

    (b) any other third party interest; and

    (c) the reasonable costs of sale.".
    Ready to Go Go!
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