By Louise Brittain
Insolvency partner at Deloitte's
Bankruptcy can be a relief and a new start for some
The word bankruptcy comes from two old English words, "bankus" which means a tradesman's table and "ruptus" which means to break.
In old England, only traders could be made bankrupt and they were then subjected to punishments such as the stocks and "the clink" - the debtors' prison where day release was granted to allow debtors to work to pay off their debts.
The rules have changed somewhat since then and some may say bankruptcy is now too easy an option.
However, there is still much misinformation about what happens when you are made bankrupt and a lot of rumour that has almost become modern myth.
The curtain falls
Anyone who owes more than £750 can technically be made bankrupt.
However, you cannot be made bankrupt overnight and it is only if you have received a statutory demand or have a judgement made against you that a creditor can begin bankruptcy proceedings.
At the start of bankruptcy proceedings, you will normally be personally served with a bankruptcy petition.
From the time that petition is filed at court, you then have at least 28 days to pay the debt or have it removed.
This is, however, a minimum period and often it takes longer than this before you are required to attend court to be made bankrupt.
On the day you are to be made bankrupt, there will be a hearing and you will need to attend court.
The hearings are normally short and the date and time that you are made bankrupt is noted.
Think of that time as the time the bankruptcy curtain falls and closes the chapter on your financial past and allows you to step towards your financial future.
Living under the burden of debt is crippling, but in the right circumstances, bankruptcy can be a relief.
Once you are made bankrupt, your financial affairs are passed to the government department called the Official Receiver to be dealt with.
They review your affairs and decide whether your case is sufficiently complicated to be passed on and handled by a private insolvency practitioner.
If your estate is simple, then it will remain with the Official Receiver.
Either way, before the Official Receiver makes that decision, he will interview you either in person or by telephone.
All your creditors must now deal with the Official Receiver and cannot continue to contact you directly.
Terms and conditions
When you are made bankrupt, your bankruptcy generally lasts for one year.
During that year, you cannot act as a director of a limited company or be involved in the management of a company.
You can incur credit, provided you inform the person giving you credit that you are bankrupt, and you can operate a bank account.
You can, and should, seek gainful employment during your bankruptcy.
After the end of the 12-month period, provided you have co-operated fully, then your bankruptcy is discharged and all your debts are written off.
I am often asked whether it is okay to transfer assets or give money to perhaps family or friends in the run-up to bankruptcy - and the short answer is "no".
Any transfer you make to anyone within five years of your bankruptcy can be reversed, unless it is a sale for proper value.
In short, if you have financial problems you are struggling with, seek professional advice.
The Citizens Advice Bureau is a good place to start or speak to your local licensed insolvency practitioner who is properly qualified to advise you.
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