BANKRUPTCY
A STEP TOWARDS FINANCIAL FREEDOM
DECLARING YOURSELF BANKRUPT MAY HELP YOU PROGRESS TO A MORE STABLE FUTURE
There are some occasions when debts can become so significant, that there seems to be no foreseeable way of ever paying them back. In these situations, bankruptcy is an option you may consider.
​
Bankruptcy is a formal, legally binding form of Insolvency. If you owe one or more of your creditors £750 then you are able to apply for bankruptcy. There is a one-off charge of £680 that can be paid in instalments. However, you will not be able to complete your application and be protected from your creditors until the full £680 has been paid. You will be discharged from bankruptcy in one year, however, if you have a disposable income you may have to pay monthly contributions towards your bankruptcy for 3 years.
​
Declaring yourself Bankrupt, as with any formal insolvency option is a big decision with a number of ramifications, but that’s why we’re here. Our advisors will help you fully understand whether it’s the right option for you.
THE RISKS AND BENEFITS OF BANKRUPTCY
BENEFITS OF GOING BANKRUPT
-
When the bankruptcy order is over you can make a fresh start – in most cases this will be after a year.
-
You don’t have to deal with people you owe money to directly.
-
You’re allowed to keep certain things known as ‘exempt goods’, for example everyday household items, tools you need to do your job, a car if you need it to get to work or you’re a carer and it’s not worth more than £2,000
-
You’re allowed to keep a reasonable amount from your income to live on
-
If you must make payments from your income, this can only be for 3 years – you won’t have to make payments if your only income is from welfare benefits
-
People you owe money must stop most types of court action to get their money back following a bankruptcy order
-
You won’t have to pay back the debts that bankruptcy covers
RISKS OF GOING BANKRUPT
-
To apply to go bankrupt you’ll need to pay a £680 fee, that you can pay in instalments.
-
If your income is high enough, you’ll be asked to make payments towards your debts for 3 years
-
It will be more difficult to take out credit while you’re bankrupt, and your credit rating will be affected for 6 years
-
If you own your home, it might have to be sold – this depends on how much it’s worth after any amounts secured on it are repaid
-
If you rent your home, your landlord can apply to evict you legally if you have fallen into rent arrears
-
Some of your possessions might have to be sold if they are not ‘exempt goods’
-
Some jobs don’t let people who have been made bankrupt carry-on working
-
Going bankrupt can affect your immigration status
-
Your bankruptcy will be published publicly (although if you’re worried you or your family might be the victims of violence, you can go to court to get an order, so your address details aren’t given out)
WHAT HAPPENS WHEN YOU DECLARE YOURSELF BANKRUPT?
You will be appointed an official receiver
The official receiver will assess your income, assets and outgoings to decide how they could be used to pay off your debts.
People you owe money to will need to make a formal claim to recover the money they are owed
They cannot contact you about payments, nor can you pay them directly.
Most of your outstanding debt will be written off
This takes a period of time to happen, and may be around a year
You will remain under bankruptcy restrictions until discharged from bankruptcy
This may affect your ability apply for credit.