Friday, September 2nd, 2022
If you have ever been broke, you may understand the concept of bankruptcy. While these two terms of brokeness and bankruptcy are different and yet are in most cases the same. A state of bankruptcy is created when you are unable (not in a financial position) to pay your debts. This is not a term one can pose on themselves lightly.
In reality, it is up to a court to decide whether an individual is bankrupt or not. In such an instance, the court will declare that said person cannot clear/pay their debts and meet their financial obligations. There is a misconception that when one is declared bankrupt then they would automatically be exempt from their debts. Like a free pass. Now, this may seem like the perfect dream it is absolutely untrue. No, bankruptcy only allows bankrupt individuals the liberty to pay off their debt in their own time as they would have no alternative avenues to do so at that time.
It is said that the world is in a state of banckruptcy, that the world owes the world more than the world can payRalph Waldo Emerson
Bankruptcy is not a private affair. Once an application for bankruptcy is made, it is required that all creditors are informed of your status. This is done through a public notice such as a newspaper. It is also required by law that once a person is declared bankrupt, they would not withhold this information from the public as this would mislead them.
Once the court has declared a person bankrupt, a court order known as a bankruptcy order is issued. This order carries the following implications;
i) The court shall appoint an official receiver who will take over management on behalf of one who’s been declared bankrupt. An official receiver is vital at the initial stages of a bankruptcy order as they will take over the property and assess how debts are to be paid. To do this, all creditors are called to discuss a way forward.
ii) All property will be transferred into the names of the official receiver. This is not a transfer of title, however, this step makes it easier for property to be sold off to settle the debt. This also means that one would lose total control of their property in such a situation.
Not all property is meant to be sold to settle debt and the court is at liberty to order this. These include;
a) Matrimonial home
c) Property held in trust by the bankrupt
Can a person who is bankrupt acquire property?
One may be concerned about whether they may still be able to acquire property after being declared bankrupt. The assumption would be that they wouldn’t, however, a bankrupt person is allowed to acquire property by buying it, through inheritance or even a gift. Though this is a privilege they still possess, the condition would be that they would acquire said property through a Trustee. Once this happens, the bankrupt must inform his trustee that there has been an increase in his income and has been able to acquire property. Withholding this information from a trustee will be considered an offence.
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