Bankruptcy is a way of recognising that you:
- are unable to pay your debts in a reasonable amount of time
- do not meet the criteria of another insolvency option
It can be seen as a last resort but can be a good option, particularly if you rent your home and have no assets.
You can petition for bankruptcy yourself or a creditor can make you bankrupt.
Your financial affairs will be dealt with by the Official Receiver.
Once you are declared bankrupt your unsecured debts are normally written off. You will have financial restrictions placed on you for the duration of the bankruptcy. This is normally 12 months.
Advantages
It can help relieve stress and anxiety.
You can make a fresh start after a year.
Your debts will be written off if you have no assets.
Your creditors can’t take further action against you, except for debts secured against your home.
You pay regular monthly payments for a maximum of 3 years.
Disadvantages
It will affect your credit rating
If you own your home and have equity, you may lose your home.
Creditors can take action to recover debts secured against your home.
There is a bankruptcy fee of £680.
Your assets may be sold by the Official Receiver.
Some debts (like student loans, court fines, penalties for fraud, maintenance and child support payments) are not included and won’t be written off.
Your employment may be affected.
Your business may be closed down.
You may have a ‘bankruptcy restriction order’ made against you for dishonesty or ‘unfit conduct’.
The Official Receiver can take criminal action against you if you have committed fraud.
Your bankruptcy will be published in the London Gazette and the local paper.