This is frequently regarded as a ‘fresh start’ approach to debt but can also be a frightening prospect. Consequently, we have summarised exactly what Bankruptcy is below and detailed some of the possible alternatives:
If you wish to declare Bankruptcy, you should complete an application online, providing information on your income, debts, and outgoings. It must also include any letters from enforcement agents or bailiffs.
An official adjudicator from the Insolvency Service reviews your application and it is their decision whether you should be made bankrupt.
There is a fee for applying for Bankruptcy, it costs £680 and would need to be paid prior to your application.
We can't help you set up bankruptcy, but we can still detail everything you need to know.
When you declare Bankruptcy, an Official Receiver will assess your income, assets, and outgoings. They will use this information to decide how they can be used to meet your debts.
The length of time for most of your outstanding debts to be written off is usually one year, allowing you the chance to make a fresh start.
You remain under restrictions of Bankruptcy until you are officially discharged.
Though it only lasts approximately one year, Bankruptcy affects your credit rating and credit reference agencies will keep the details on file for a minimum of six years.
When you go bankrupt, any unsecured debts in your name will be added. These include personal loans, payday loans, catalogues, and credit cards.
Other debts could include:
Debts not included in Bankruptcy include secured debts - such as a mortgage or charging order.
The advantage of a Bankruptcy order is that you can make a fresh start, which in most cases would be after a year. The other advantages include:
There are disadvantages to Bankruptcy. For example:
For some people, dependent on their situation, an IVA (Individual Voluntary Arrangement) may be a better option than Bankruptcy. Homeowners or business owners may find it better to choose an IVA rather than potentially lose their home or assets.
An IVA offers more flexibility than Bankruptcy and, depending on your circumstances, personal possessions and other assets could be kept rather than using them to pay your creditors.
Furthermore, you can continue to use your bank account if you have an IVA. There is no need to notify your bank about an IVA, whereas with Bankruptcy your account is likely to be closed and you may find it difficult to open another.
There are, of course, risks with an IVA. For example, it may not be suitable if your circumstances are likely to change or you’re unable to keep up with the payments.
The best option is to talk things through with a debt adviser before you make your decision, often this is because your debt solution depends on your circumstances.
They are there to give you the support you need and help you regain control of your finances. Although we can only help you with an IVA, we can still determine if bankruptcy may be the best solution for you.