Opting for bankruptcy should only be taken as a last resort where you have serious debt problems and cannot repay your debts within a reasonable amount of time. Here we will analyze some of the key points in regards to this solution.
What you need to do if you want to declare bankruptcy?
To apply for bankruptcy you can use an online application form available on the government agency website where you will need to fill in your details as well as your income and expenses.
You will also need to provide copies of correspondence where you have been contacted by bailiffs or debt collectors. Your application will be sent to an official adjudicator, who will review the application and decide whether or not to declare your bankruptcy. The next step is to pay the £680 fee and wait for 28 days for a decision to be made.
If you have a business partner and you have any debts together you can apply for a joint bankruptcy as long as everyone involved agrees to it. Couples, however, are unable to apply for joint bankruptcy and must apply individually, even if the debts are jointly owed. Be careful though if you and your life partner have joint debts, where you are both named on the credit agreement, if one of you goes bankrupt, the other person will be responsible for paying the full amount owed on their own.
Is declaring bankruptcy a good solution for me?
You should always enter bankruptcy as a last resort and only consider if the following criteria are met:
If your total unsecured debt is higher than the value of assets you own
If you think it is truly impossible for you to repay your debts within a reasonable time
If your monthly disposable income is too small to afford payments into a scheme such as an IVA
If you believe that your financial situation will not change in the future or will even deteriorate further
How to declare Bankruptcy
It is very important to get the best advice when considering bankruptcy as it may or may not be the best debt solution for you.
Before you declare bankruptcy withdraw enough cash to be able to live on until your next pay day because after approval the bank accounts will be frozen
Fill in your Application and pay the £680 fee
After your application for bankruptcy is accepted, your bank accounts are immediately frozen.
An ‘official receiver’ will be assigned to your case who will then decide which of your assets will be confiscated and if you will need to make any monthly payments.
Details of all bankruptcies are recorded on the public Insolvency Register.
During your bankruptcy, you will also need to open a new bank account for wages and living expenses.
The advantages to declaring Bankruptcy
By declaring bankruptcy you are given the chance to start a new after one year.
If your creditors are coming after you you might be able to get rid of the pressure by transferring all the communications to the official managing your bankruptcy.
The companies included can no longer take legal action against you.
You’ll be able to keep your essential belongings, a car that is worth less than £1,000 and money for everyday life.
If you’re self-employed or own a small business you can keep everything necessary to keep working and running your small business.
If you do not own your house then you will still be able to live in it.
The disadvantages to declaring Bankruptcy
Your bankruptcy will be reflected on your credit score and will affect negatively your ability to take credit for the next 6 years
Your bankruptcy will be put on public record which might affect your career
You will lose ownership of your home and any assets/cars worth more than £1,000
You will not be able to work as a company director or be involved with the management of a limited liability company.
You need to pay £680 to go bankrupt.
You will not be able to apply for British Citizenship
What happens after one year?
You will normally be discharged from your bankruptcy after 12 months and any remaining debts will be written off. It is recommended that you request a letter of discharge to have official proof of the fact.
Your discharge does not mean that you will not continue paying any monthly payments that you still owe, for example, under a three-year income payment agreement.
By the end of the bankruptcy, you will be informed of this by the official receiver and most of the debts that have been included will be written off. However, you need to keep in mind that a bankruptcy restriction order made against you might continue for the next 15 years.