Bankruptcy is a formal court-driven process by which an individual's assets are taken over by Trustee in Bankruptcy. The Trustee in Bankruptcy is the insolvency practitioner and who has been appointed by the individual, his or her creditors or the court to take control of (and sell) the assets of the individual and to distribute the proceeds to creditors.
Where the individual presents the petition to court, the bankruptcy order may, in some circumstances, be made on the same day. Conversely, where a creditor presents the petition, the individual will have time to mount a defence before the court hearing.
Once appointed, the Trustee in Bankruptcy will sell the bankrupt's assets (including his house if necessary) in order to distribute funds to the bankrupt's creditors. He/she will also investigate the conduct of the bankrupt prior to his bankruptcy, to see if there are any transactions that need to be reversed, such as preferential payments to the bankrupt's friends or family. An order for bankruptcy will last for 12 months unless there are circumstances which mean that it should be extended by the court.