Advantages of Bankruptcy
| Protection: | Once you have been declared bankrupt, creditors can no longer chase you for outstanding unsecured debts. |
| Clear debts: | Although restrictions apply, Bankruptcy can free you from unsecured debts. |
| Peace of mind: | Bankruptcy is one of the most severe debt options available to people who are struggling to repay debts, however it can alleviate the stress associated to dealing with a number of creditors. By removing this pressure, you can begin to concentrate on your priority debts and get your finances back on track. |
Advantages of Bankruptcy
| Fees: | Typical costs to petition for Bankruptcy include an Official Receiver Fee or Deposit of £525 and court fees of £175; however the court may waive this fee in some cases. You may also have to have to make regular contributions from your salary; however this is dependent on your personal circumstances. |
| Restrictions: | Certain restrictions will be placed on you and you will lose control of your assets, including any equity you may have in your home. |
| Business: | If you own a business, you may be asked to close it down. |
| Lending: | You will find it difficult to secure credit in the future. |
| Credit rating: | Your credit rating will be adversely affected in the long term. |
| Debts: | Only unsecured debts (debts not secured against property or assets) can be included in a Bankruptcy application. Debts including hire purchase agreements, student loans and child support are not included and must still be paid as normal. |
| Career: | You will no longer be allowed to hold certain public offices. In some circumstances your employment may be affected – you should check with your Human Resources department before applying for Bankruptcy. |
| Declaration: | You will have to declare that you have been made bankrupt when opening a bank or building society account. If you have a bad credit rating, you will find it difficult to open an account. We recommend the Evolution Current Account as you do not need to complete a credit check to qualify and it gives you greater control over your finances. |
Difference between going bankrupt and being made bankrupt
Going bankrupt essentially means that you have made the decision to file for Bankruptcy. People reach this stage when their debt liabilities exceed their income and they are struggling to meet repayments or are unable to repay their creditors.
If you decide to proceed with Bankruptcy, you can choose to represent yourself or ask a professional debt specialist to handle your case. This option can make the application process much less stressful for the person seeking Bankruptcy.
If you owe a creditor £750 or more, and have a history of missed payments, then the creditor could file a petition with the courts for you to be declared bankrupt. However, before they can do this, the creditor must serve a Statutory Demand for payment within 21 days.
If the court grants the creditor’s request, then this will result in you being made bankrupt.
Bankruptcy and your assets
During the Bankruptcy process you will lose control of your assets, which could be sold to repay your creditors. Assets include properties, cars and belongings of value. You will not be required to sell essential belongings or items that you need for work, such as tools.
An appointed Insolvency Practitioner or an Official Receiver will act as your Trustee and will decide what to do with your assets during this process.
The Trustee will also deal with your creditors on your behalf; therefore you will have no more contact with these companies once you are declared bankrupt.
Baines and Ernst Ltd