Bankruptcy is fast becoming a real solution to many thousands of ordinary people facing serious consumer debt problems in the UK. Many people who have no or very little disposable income to pay to creditors are turning towards Bankruptcy to become totally debt free within 12 months or less in some cases.
Bankruptcy is a court based procedure - and you can choose to become bankrupt (or it can be enforced upon you) if you cannot pay your debts. Your assets will be placed in the hands of an officially appointed Trustee (who has extensive powers of investigation) who will take steps to turn your assets into money, which can be used to pay off your creditors.
Bankruptcy can be a very clear and straightforward way of resolving your financial affairs, since the introduction of the the Enterprise Act 2002, any outstanding liabilities you have are written off after 12 months or sooner.
Bankruptcy Process
You or your creditors can make a bankruptcy petition to either your local County Court or to the High Court in London. The court will then initiate a bankruptcy order against you.
- There will be three fees payable in cash on the day you go bankrupt -- a court fee, an administration cost and a fee to swear your statement of affairs during the bankruptcy process (Total = £510).
- When your order is approved then you will have to work with the Official Receiver to assess and wind up any assets that you have to go towards paying off your debts.
- Once your bankruptcy period is finished any remaining debts that you have will be written off.
Advantages to Bankruptcy
Bankruptcy comes with a range of benefits that may make it the best solution for many people with serious debt problems. For example, bankruptcy can help you:
- Totally clear yourself from debt within a relatively short space of time and then make a fresh financial start. You will pay off some of your debts from your assets and the rest will be written off at the end of the period.
- Prevent creditors from chasing you for the money that you owe. Once you have a bankruptcy order in place they have to leave you alone, by law.
- Long Term - All your debts are written off leaving you debt free within 12 months.
- Short Term - Stops Debt & Bill collectors harrassing you for money.
Disadvantages to Bankruptcy
Bankruptcy may be the best or only solution to your situation, however the following are some of the implications:
- If you run your own business then it will generally be wound up.
- Your assets will be used to go towards repaying what you owe. This could mean your home, car and other possessions such as pensions etc.
- Other people will be able to see that you are in the bankruptcy process as bankruptcy orders are advertised.
- You will not be able to use standard bank accounts and all financial institutions that you use will be notified of your bankruptcy. You will also not be able to apply for new credit agreements over £500 unless you inform the lender that you are bankrupt.
- Your bankruptcy will show up on your credit history for at least 6 years which may make it hard to get new finance in the future.
- Some professions will not allow you to work within them if you are bankrupt and you cannot serve as a Director of a limited company.
Do I qualify for bankruptcy?
Generally speaking there are no limits set on whether you can declare yourself bankrupt. However, if a creditor is trying to have you declared bankrupt then you need to owe them at least £750.
Debt Helpline UK 07956 210422 
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