Home / Money Articles / Guide to bankruptcy

Guide to bankruptcy

Guide to bankruptcy
Loading 

Written by:

In the wake of the global financial crisis bankruptcy ceased to be a dirty word and instead became a much needed way out for thousands of individuals and businesses across the UK. More recent statistics suggest that numbers have finally stabilised once more.

I was always brought up to believe that bankruptcy effectively meant your financial freedom in life was over – it was a thing to be avoided at all costs. Not so. Yet the implications for your credit rating remain serious, and bankruptcy is still not an option that should be considered lightly. If you are wondering whether bankruptcy is a good choice for you, then here’s what you need to know:

Is Bankruptcy Right For Me?

To be eligible for bankruptcy if you must be insolvent – this simply means that the value of your unsecured debts exceeds that of your assets. Unsecured debts are things like store and credit cards, and personal loans. Your assets are things you own, in whole or in part, such as your car or your home. If you are insolvent and have little chance of reducing your debts anytime soon, then bankruptcy could be a good solution for you.

How does it Work?

guide to bankruptcyAn Official Receiver is appointed to manage your financial affairs through the bankruptcy period. They will facilitate the writing-off (cancellation) of your unsecured debts, allowing you to make a fresh start. Any valuable assets you have may have to be sold as a part of the process, but things you need for daily living are normally left untouched. There are fees to pay, that currently sit at just over £700 in England and Wales.

Need to Know:

• Bankruptcy protects you from any further contact from your creditors of unsecured debts

• You may have to sell valuable assets, including any equity you have in your home

• Personal Bankruptcy usually lasts for one year, a period in which you are not allowed to borrow any money at all

• The bankruptcy notice remains on your credit record for six years

• It also prevents you from acting as a company director

The short-term benefit of bankruptcy is the instant freedom from the burden of excessive debts. But the longer term implications may follow you for years to come – even once you become solvent once more you may be unable to easily secure future credit as a result of your bankruptcy choice.

There many impartial organisations in the UK who can offer you sound advice on bankruptcy, and help you to decide if it could be the best solution for you. Bodies such as the Citizen’s Advice Bureau can also direct you to resources that can help you to explore other less damaging solutions too, such as an IVA, or Individual Voluntary Arrangement. These help you to repay some of your debts in a manageable and controlled way, and have less severe implications for your credit history. Exploring all the options before you jump will help you to make the right decision for you and your financial future.

Share

Comments

About Cally Worden

About Cally Worden

Seasoned freelance writer Cally Worden lives with her family and dog in a quiet corner of rural France. A love of the outdoors, and a fascination with her children's ability to view life with fresh eyes provide the inspiration for much of her work. Cally writes regularly for various websites and UK print publications on subjects as diverse as parenting, travel, lifestyle, and business, and anything that makes her smile.

Website: Cally Worden

View all posts by