Debt problems are growing but what debt help is available? What is an IVA, a Debt Relief Order or a debt consolidation loan? Continuing our series of articles looking at solutions for debt problems we consider bankruptcy.
Going bankrupt may seem attractive as it does mean you will get rid of all your debts.
However, the bankruptcy option to deal with your debt problems has serious implications and therefore needs to be thought through very carefully.
Get professional debt advice before you take this option or any debt help solution.
What does bankruptcy do?
Basically it frees you from all your debts but there are implications, see below. Normally you will have an automatic discharge from bankruptcy in a year, or sometimes less.
Bankruptcy also ensures that any assets you have are shared amongst your creditors.
How are you made bankrupt?
You can either voluntarily make yourself bankrupt, be made bankrupt by a creditor to whom you owe more than £750 or it can result from issues arising with payments being made under an IVA. In this case the IVA controller or anyone bound be the IVA could make you bankrupt.
If you are made bankrupt, what are the implications?
If you are declared bankrupt then you will
- Lose any assets you have, including your home
- Lose any assets you acquire whilst bankrupt, including any inheritance
- Have all your bank accounts, credit cards etc closed
- Have anything leased, such as a car, returned to the owner
- Lose your status in terms of your business and professional life and may find some issues with certain employment or membership of selected societies e.g. Estate agent, Stockbroker, Insolvency Practitioner, Pub Licensee or Member of the Law Society.
- Have your Bankruptcy Order on your credit file for 6 years. This will make it more difficult to obtain credit in the future.
- Have you bankruptcy published in the London Gazette
- Have any business you own closed
- Not be able to act as a director of a limited company or form, promote or manage a company without first getting permission from the court.
So it can clearly be seen that there are advantages to a bankruptcy, but there are also serious implications which need to be carefully considered – it may be time to get debt advice.
There are alternatives to bankruptcy though, for example you might want to consider