Bankruptcy advice - is bankruptcy a last resort?
Bankruptcy is probably the most drastic of all debt solutions and should be considered only when all other options have been completely exhausted. If you’re reading this because you are out of other options or you want to be armed with the facts, here’s what you need to know:
Personal bankruptcy can be forced on you by any creditor that is owed £750 and has had repayments frequently missed. It can be forced on you if you miss IVA repayments. It can also be entered into voluntarily. If you are declared bankrupt you are no longer responsible for paying your debts (except Student Loans) and you cannot be pursued by creditors. However life may not be easy because:
- You may lose your home if there is equity in it - although not for 12 months
- If you need your car for work you will have to trade it in if it's worth more than £500 - other possessions like your TV, sofa, DVD player, bed etc. are usually safe.
- During the period of time you are bankrupt (normally 12 months), you cannot take out a mortgage, be a Company Director, join the police or military, or practice as a Chartered Accountant, Lawyer or other positions that involve significant responsibility
- You may also be required to make payments to the court for 3 years after being made bankrupt if you can afford to do so under an ‘Income Payment Order’
- Bankruptcy is not a private affair and your name will be published in the London Gazette and your local newspaper
- Your credit rating will be badly affected
- You can’t get any form of credit over £250 without telling the company you’re borrowing from that you are bankrupt
If there is any upside, payments to the court will stop after 3 years. This is two years earlier than an IVA and is likely to be quicker than Debt Management and Debt Consolidation.
If you have debts of under £15,000 you should find out more about Debt Relief Orders as it may be a better, cheaper and faster way of solving your debt problem.
You’ll find lots of bankruptcy information in our Questions and Answers about bankruptcy. If you don’t find what you’re looking for, why not ask a question?
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