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Should you file for bankruptcy? : The Standard



Should I file for bankruptcy?

Dear Dr Pesa,

I am a 31-year-old man and deep in debt. Auctioneers, banks and even the landlord are all after me. My business is failing and I have no way to pay them back. I tried shylocks but that just left me drowning in debt. Should I file for bankruptcy? Will it haunt me for the rest of my life?
Dear sir,
Sorry to hear about your financial situation. Here are some things you should know:

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Bankruptcy proceedings can be instituted by natural persons as provided for by the Insolvency Act. It can be instituted by application from either the creditors of a debtor or on the application by the debtor. A debtor can decide to file for bankruptcy where they are in too much debt and have no way to pay them back. Filing for personal bankruptcy can help one manage their debts.
Bankruptcy proceeding involves various parties which include: the creditors, the auctioneers, the bank or the landlord among others being ordered not to meddle with the debtor as the court will appoint trustee to manage their properties in order to facilitate repayment of the existing loans.
The process
An individual must be familiar with the conditions and process of bankruptcy.
The proceedings are instituted by presenting a bankruptcy petition the High court. The petition prays for a receiving order to be made in respect of the debtor’s properties. The court may then dismiss the application, if it has no merit or make the receiving order. The receiving order does not make one bankrupt; it only places their properties in the custody of the official receiver appointed by the court pending the outcome of the proceeding.

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The bankruptcy petition must be accompanied with a supporting affidavit to the petition, a statement of financial position which must include the particulars of the debtor and creditors and an application of appointment of a trustee. The court may reject an incomplete or incorrect statement of financial position.
The debtor is then required to publish the notice of the application in a newspaper of nationwide circulation. They must include their full names, place of residence, and their trading address. This means that the public will be aware of such a move and the debtor can be ridiculed by the society hence one needs to use this means where they have depleted all other options. 
The bankruptcy petition is then required to be served upon the creditors who must be given time and opportunity to oppose such application where they can prove that the debtor can be able to pay their debts.
The first meeting of the creditors is held where they determine whether a scheme of arrangement submitted by the debtor can be accepted or whether an application can be made to the court to adjudicate the debtors’ bankruptcy. The court then makes the adjudication order to declare the debtor bankrupt where the debtor qualifies for such order.
Not all financial obligations can be subjected to the automatic stay, amounts payable under the children Act and matrimonial Cause Act are exempted from such an order.

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Where a person is adjudged bankrupt:
1. The property of such a person vests in the bankruptcy trustee or official receiver. This basically means that the debtor is limited to the use of their properties, they cannot sell them or act adversely towards them until all debts are cleared and they are discharged from the bankruptcy state;
2. The person becomes restricted as to the business activities they can undertake and;
3. The official receiver is entitled to recover assets of such a person transferred within the two years preceding the bankruptcy. This move is intended to protect the creditor from a debtor who would want to conceal their properties from the proceedings.

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Bankruptcy proceedings is intended to protect the debtor from the creditors. Upon filing the application, the court issues orders to bar the creditors from harassing the debtor and meddling with their properties. It is important to note that the order does not in any way cancel the debts, it only relieves the debtor from having to deal with the creditors.
There are alternatives to bankruptcy including the debtor entering into a voluntary arrangement with the creditors, make a proposal to creditors, pay creditors in instalments or enter the no asset procedure. Going to shylock as an alternative is not prudent as they tend to charge interest at exorbitant rates and will only make the problem worse as one will find themselves in more debts.
Being declared bankrupt will not necessarily haunt one for the rest of their lives, upon repayment of debts as directed by court, the court will discharge a bankrupt person this means that one can start afresh in that any asset one acquires after being discharged will be their own and not be used to pay is important to note that institutions keep records of their clients and in future it may be harder to trade with them as they will be of the opinion that such a person may not honour their obligations in future. One therefore has to rebuild the relationship with such institutions to gain trust.
Dr Pesa, The Standard Group – Legal Team ([email protected])

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