10 things to watch out for when... Declaring bankruptcy
What does it mean?: Declaring bankruptcy happens when a person is insolvent, unable to pay their debts and has no reasonable prospect of being able to pay outstanding amounts as they become due.
What happens?: Your estate will be administered by the court who will investigate the reasons for insolvency, collect and distribute your property equally among your creditors and enable you to make a fresh start free from debt.
Are there costs involved?: An individual applying for bankruptcy will need to pay a deposit of HK$8,650 to the Official Receiver and a court fee of HK$1,045 - that is about HK$10,000 up front to declare yourself bankrupt. Costs rise if you choose to use a lawyer to represent you in court.
Do you lose everything?: You will retain personal effects such as clothing, electrical appliances and even your mobile phone - but other significant assets such as property, expensive jewellery or a new Rolex will be taken over to repay your creditors. In some cases the court will rule that you must continue to pay down your debts.
Any other consequences?: Once you have been declared bankrupt no proceedings can be commenced against you without permission of the court. It can take a few months between application and declaration, however, during which time you could have debt collectors banging on your door. Once bankrupt, you will need to submit an annual statement of financial affairs or face six months' imprisonment. You or your representative will need to attend all creditor meetings.
What else?: A bankrupt may not hold public office or become a company director without permission of the court. You cannot obtain credit of HK$100 or more without disclosing that you are an undischarged bankrupt.
Other restrictions: You must stop using all bank and other accounts but can open a savings account to receive a salary, if you declare you are bankrupt. You cannot pay individual creditors directly or travel without permission of your trustee.
How long?: After four years you will be automatically discharged from bankruptcy. In exceptional circumstances such as lack of co-operation in liquidating your estate, this period can be extended to eight years.
Any other options?: Individual voluntary arrangements offer an alternative to bankruptcy and do not come with the same restrictions or stigma. You and your nominee - such as accountant or lawyer - can submit a proposal to your creditors to repay your debts, without interest, over a certain period of time.
Where do I go for help?: Solicitors Yip, Tse & Tang handle personal cases while firms such as Baker Tilly deal with bigger clients and companies. Call the Official Receiver's Office hotline (2867 2448) or refer to the Web site (www.info.gov.hk/oro).