Cancelling Bankruptcy

The black mark of bankruptcy can be removed but only in certain circumstances.

Last week, the Liverpool defender, John Arne Riise was declared bankrupt for unpaid debts of almost £100,000. Now for a footballer who reportedly earns £50,000 a week, this seems bizarre to say the least although it all seems to be part of a dispute with a former agent. Anyway, not surprisingly, his lawyers have already gone back to court to ask for the bankruptcy to be annulled.

A bankruptcy annulment is not the same as being discharged from bankruptcy. In the latter case you'll be bankrupt for about a year, you'll lose almost all of your assets and a record of your bankruptcy will remain on your credit file for six years even after you've been discharged.

But if a court agrees to annul the bankruptcy, then it will be as if you were never bankrupt in the first place which is obviously a much better position to be in.

You can apply for an annulment at any time if:

• the bankruptcy order should not have been made -- for example, because the proper steps were not taken when obtaining the order; or
• you have found the money to pay all your bankruptcy debts and court costs or you've offered some form of security acceptable to the court; or
• you have reached an agreement with your creditors to repay all or part of your debts via an Individual Voluntary Arrangement (a formal debt management plan)

Needless to say, most people who declare bankruptcy or who are made bankrupt don't have the assets to pay what they owe so they have to wait to be discharged. But if part way through your bankruptcy, you win the lottery or a wealthy aunt dies leaving you all her money, then that's when you could pay everyone off via your Official Receiver or Insolvency Practitioner and apply to get your bankruptcy annulled.

If successful, you will then revert to your pre-bankruptcy status. If any of your assets have already been sold to pay some of the debts, then these disposals will remain valid and will not be reversed. But any other assets will be returned.

> Find out more about how to Get Out Of Debt
> Creditors Clamp Down On IVAs

With thanks to Martin Reynolds of Horsey Lightly Fynn Solicitors