How does Bankruptcy work?

In the UK any individual can file for bankruptcy provided that they can prove they are unable to pay the debts they have accumulated this is known as a debtor's petition or voluntary petition for bankruptcy.

Although bankruptcy does have a poor image and is publicly advertised, it should always be considered as an option along with any other debt solutions when dealing with personal Debt Problems.

Alternative debt solutions such as Debt Management or an IVA are often considered or entered into prior to bankruptcy as they are not public knowledge and do not always carry some of the negative aspects of bankruptcy such as;

• Your ability to obtain credit is affected for a number of years after discharge and you will have difficulties opening a new bank account with certain lenders.
• You can lose control of your major assets such as your home.
• You cannot act as a company director or take any part in the endorsement, development or management of a limited company without a court’s permission.
• You may not practice as a Charted Accountant / Lawyer or become a Member of Parliament or a Local Authority.

It is for these reasons that bankruptcy is often considered to be a last option for an individual who cannot pay debts but in most cases a first time bankruptcy petition will be discharged one year after the date of the bankruptcy order and in some cases this can happen in less than a year.

In some circumstances however a bankruptcy petition can even be reversed or cancelled, although this is only the case assuming certain conditions have been met. These are that all your bankruptcy debts and fees related to your bankruptcy have either been guaranteed or paid in full or that you have reached an agreement with your creditors to pay part or all of the debts over an agreed period of time.

Is Bankruptcy right for me?

The most important fact to remember about bankruptcy is that once you have been made bankrupt or filed for your own bankruptcy all of your assets including your home come under control of the “Official Receiver”. Once the bankruptcy petition has been filed however your creditors can no longer pursue you for payment of the debts as they are no longer your responsibility to deal with.

Bankruptcy should always be considered especially in cases where Debt Problems are severe. Where possible you should seek out professional advice and consider all solutions on offer such as Debt Consolidation loans and Debt Management plans before making your final decision.

For more information on bankruptcy or if you want some helpful Debt Advice about your alternatives read our Debt FAQ or call one of our trained debt planners for more information. Call us directly on 0161 8500138 or Apply Online today