EVERYONE has heard of people being declared bankrupt but it’s not as simple as just having no money.
Here’s all you need to know about the complex way people get their debts written off.
What is bankruptcy?
Bankruptcy is a legal status whereby debts cannot be repaid.
In the UK being bankrupt is limited to applying to individuals but in the US and some other countries it can be applied to companies as well.
The word itself is derived from the Italian phrase banca rotta meaning “broken bank”.
In the modern world it normally involves a restructuring of debts in an attempt to rehabilitate those who owe the money and sometimes continue with their business.
In most jurisdictions people or companies are declared bankrupt by a court order.
Is it the same as insolvency?
Bankruptcy is just one type of insolvency in the UK.
There are two legal definitions of insolvency in the UK with one being where a business or individual’s liabilities (what you owe) exceed your assets (what you own), or, where you are unable to pay your debts as they fall due.
Additionally there are several different types of insolvency, only one of which is bankruptcy, these include:
- liquidation (applies to a limited company or partnership)
- administration (applies to a limited company or partnership)
- company voluntary arrangement (applies to limited companies)
- partnership voluntary arrangement (partnerships)
- individual voluntary arrangement (individuals who can also be made bankrupt)
- debt relief order (where an individual owes less than £15,000)
Is Katie Price bankrupt?
The reality star has managed to dodge bankruptcy but has only 12 weeks to stave off financial ruin.
Katie, 40, saw her once lucrative media empire fall apart after the downfall of her third marriage and the collapse of her businesses.
Her team appeared at London’s High Court on August 7, when they submitted proposals for an individual voluntary agreement (IVA).
She has just three months to come up with a plan to pay off her debts before her application is heard on October 30.
Which famous people have gone bankrupt?
Several celebrities have gone bankrupt over the years, here are just a few of the big names who have filed over the years:
- Donald Trump has had six of his companies declared bankrupt during his years is business but has never filed personally
- Meghan Markle’s dad Thomas filed for bankruptcy last year with credit card debts of £24,181
- 50 Cent filed for bankruptcy in 2015 despite once being worth an estimated £119million
- Former Westlife singer Shane Filan filed for bankruptcy in 2012 with £20.5 million of debt
- Lady Gaga was technically bankrupt during her Monster’s Ball tour in 2009
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