Bankruptcy

In England, Wales and Northern Ireland bankruptcy is a way to handle debts that you are no longer able to pay. If you are made bankrupt any of your assets, including your home and valuable items, may have to be sold in order to raise funds. If you abide by certain restrictions you will be free from your debts after a fixed period of time, usually 12 months.

Bankruptcy is just one of many debt solutions; there are usually plenty of other options available including IVAs and Debt Management Plans. If you are struggling with debts and unsure about what to do, contact Rite Financial to discuss your options.

In order to be made bankrupt you must have more unsecured debts (such as personal loans, credit cards, and overdrafts) than assets. If you are declared bankrupt by the court, your creditors will have to write off your outstanding debt, allowing you to make a fresh start financially.

Should I petition for bankruptcy?

In order to go bankrupt you need to have explored the other options open to you as bankruptcy should only be considered as a last resort. Anyone can petition for bankruptcy but there are severe consequences to such a major decision and as such it is absolutely essential that you discuss your personal circumstances with an adviser. Bankruptcy is only available to residents of England, Wales and Northern Ireland, the Scottish equivalent is known as sequestration.

Advantages

Although bankruptcy should only be considered in extreme cases, there are some benefits to being declared bankrupt. The main reason people consider going bankrupt is to achieve financial freedom, wipe the slate clean and start again. After the bankruptcy period, usually 12 months, all debts are discharged meaning that you will no longer owe any money.

The companies you owe money to (creditors) will no longer be able to contact you or chase you for payments. This can relieve a huge amount of stress and pressure, and allow you to start re-building your life.

As only assets can be used to pay off any debts, if you rent your property you will not risk losing your home. You are also legally allowed to keep a car provided it has a value of less than £2500. 

Disadvantages

There are a lot of disadvantages to consider before declaring yourself bankrupt as in some cases they can affect you for the rest of your life. You will be required to sell any valuable assets including your property, car, and income in order to pay off some of the debts owed to your creditors.

Becoming bankrupt can have a major impact on your employment as you are unable some job positions if you are bankrupt. If you own your own business it will be closed down immediately and your employees will lose their jobs, and you will not be able to act as the director for any limited company.

As soon as you are declared bankrupt by the court your bank, building society, creditors, and even landlord will be informed. The details of your bankruptcy will also be published in newspapers by the local media.

If you gain any assets during the term of the bankruptcy, lottery winnings or inheritance for example, these must be declared and will be taken from you.