Bankruptcy is a formal method of declaring bankruptcy for people living in England, Wales and Norther Ireland. Bankruptcy can be an incredibly effective way of wiping out debt and getting back in control of your finances, but since it can put important assets like your family home in danger other options should be explored first.
If you live in Scotland, you have to go through the legally similar process of entering sequestration.
Am I eligible for bankruptcy?
In order to be eligible you must fit the following criteria:
- You cannot realistically pay your debts as what you owe outweighs what you can pay by a significant amount. In other words, you are insolvent.
- You don’t have the disposable income to qualify for another less extreme debt solution, such as an IVA.
- Your situation is deteriorating and there is no sign this is going to change in the near future.
- In just a year your debt can be completely wiped out. After your monthly repayments have reached an end, you’ll be entirely debt free.
- From the moment the actual bankruptcy process is underway you can forget about creditor harassment. They cannot attempt to contact you or take legal action against you.
- In some cases, such as if you are a homeowner with little equity on the property, we might be able to protect it from liquidation.
- When you declare yourself as bankrupt all of your assets are in real danger of being sold. This includes your home and vehicle.
- Lenders will be unlikely to offer you any loans for six years after becoming bankrupt, as it will remain on your record.
- If you are bankrupt, it may be difficult to raise the £680 necessary to submit the application.
- Entering into the procedure will make it difficult to work in certain professions. You will not be able to become director of a company. You are also excluded from many other roles in the financial sector.
Whatever way you look at it, there is no getting around the fact that a measure as extreme as bankruptcy should be a last resort. However, there are certain circumstances where the process can be a fantastic way to write off debt and hit the financial reset button. It can also put a very swift end to stressful harassment from creditors.
Every situation is different, and it is important that you seek out professional advice before making any decisions. Our firm is well-equipped with our large team of friendly non-judgemental advisers to come up with a solution that works for you and your circumstances.
How does declaring bankruptcy work?
Step 1: After you have made contact with us and had a chat with our team, we will take the time to analyse your finances and work out what solution is best to get you back on top of your finances.
If it works out that bankruptcy is the only viable option to move your situation forwards we will suggest this to you, but you are under no pressure to take things any further. Our advice is always free, and all implications and repercussions will be outlined for you.
Step 2: If it is the case that you do want to declare yourself bankrupt, you can begin the process online. It will cost £680 (£669 if you are in Northern Ireland), although it is possible to pay this total up in instalments.
The Insolvency Service will assign an independent adjudicator who will consider your application and decide if you can be declared bankrupt.
Step 3: When your application becomes accepted your bank accounts will be frozen. The Insolvency Service will assign you an official receiver (generally this will be us, as your insolvency practicioner), and we will determine what, if anything, you can afford to pay towards your creditors. We will also decide which of your assets will be liquidated and how the profit should be distributed amongst your creditors. From this stage, we will take care of all communications.
Step 4: You will be discharged from your bankruptcy after only one year provided you have met every term and condition of the agreement. All remaining debts will be wiped out, and creditors cannot attempt to reach you to reclaim any more of what they were owed.
However, if you were asked to deliver a monthly repayment this will continue until the bankruptcy process has reached completion.
After your monthly commitments have transpired you begin to rebuild your finances and credit rating.
What are the advantages and disadvantages of declaring bankruptcy?
If debts are beginning to take over your life and you need a debt solution then speak to our knowledgeable team and we may be able to offer a solution. Bankruptcy is an extreme option, so it’s always better to get some trusted advice on whether any other option is viable. Pick up the phone now, the sooner you do the sooner we can get your financial affairs back in your control!
For more information call 0800 505 5124