Bankruptcy

Bankruptcy is the most severe consequence of debt and should never be entered into lightly. For some people, however, bankruptcy may be the most appropriate solution. It can be the best way to repay what they can of their debt, write off the rest – and make a fresh start.

Should I consider bankruptcy?

If your debts are high and your income is low, it’s worth finding out more about bankruptcy. Ask yourself:

• Do I think my financial situation will get better in the foreseeable future?
• Do I own property or other valuable assets?
• Can I realistically expect to repay my debt within a realistic timeframe?
• Do any of the alternative debt solutions look right for me?

If the answer to every question is ‘no’, there’s a good chance bankruptcy could be right for you.

What are the advantages of bankruptcy?

• You’ll know you’ll be debt free – and when
• Your stress levels may go down once you know your debt problems are being addressed
• You’ll be protected from legal action by your creditors
• The debt you can’t afford to repay will be written off when you’re discharged from bankruptcy (usually after 12 months)
• You’ll be able to make a fresh start when your bankruptcy is over

What are the disadvantages of bankruptcy?

• Your valuable assets, including your home, will almost certainly be sold, and the proceeds shared among your creditors
• Bankruptcy will prevent you from working in certain areas – you won’t be able to work as a local government councillor, for example, or a company director
• Your bankruptcy will be advertised in newspapers
• Bankruptcy is a form of insolvency – a formal, court-driven process
• Your bankruptcy will affect your credit rating for 6 years

You should weigh up the pros and cons of bankruptcy yourself, but you shouldn’t make any decisions without talking to a specialist. Before you make your decision, you need to understand how bankruptcy would affect you, and how those consequences differ from those of the alternative debt solutions (see the list below).

To talk to one of our specialists about bankruptcy, call us on freephone 0800 161 3516 – or fill in the call-back form on this page and we’ll phone at a time that suits you.

How do I apply for bankruptcy?

First of all, there’s Voluntary bankruptcy: you file a bankruptcy petition at the County Court, and it’s up to the district judge to decide whether or not to grant the bankruptcy. It costs £485, but the court fee (£150 of this) may be waived if you’re on a low income or unemployed.

Then there’s Involuntary bankruptcy: any creditor can petition for your bankruptcy if they’re owed £750 or more.

What are the alternatives to bankruptcy?

Bankruptcy is just one solution to debt. Many people would be better off considering one of the following:

• IVA (Individual Voluntary Arrangement)
• Debt management programme
• Debt consolidation mortgage
• Debt consolidation loan

Debt News Stories