What is Bankruptcy?
Out of all the debt solutions available, Bankruptcy is perhaps the most well known. This is because we often hear about people or businesses in the public eye going bankrupt.
Bankruptcy is a debt solution that could free you from unsecured debts in 12 months – but it certainly isn’t without stresses and strains. For example, you could lose your home if you are a homeowner, your valuable goods will be sold to repay your lenders and you will find it hard to secure credit in the future.
We always say Bankruptcy should be a last resort and will help you find out if your money troubles could be resolved in another way first.
But if you really cannot afford to repay your debts and have no way of clearing what you owe, then Bankruptcy could be the answer to your debt problems.
You will no longer need to make repayments on your debts every month when you declare bankruptcy.
However, in some cases, you may have to make contributions from your salary for three years from the start of Bankruptcy to help repay what you owe, but this will depend on your personal situation.
Bankruptcy normally lasts for 12 months, so after this time you could be released from your Bankruptcy Order which means you will be free from unsecured debt.
Once you have been declared bankrupt, lenders can no longer chase you for payment – which will help to cut pressure surrounding debts.
Bankruptcy can be a confusing process – but you don’t need to go through it alone. Our Bankruptcy Support Service will help you to make sure all your paper work is in order and completed correctly so your Bankruptcy Order can be processed as quickly and as smoothly as possible.
Bankruptcy - what you need to know
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At Baines & Ernst, we help people beat debt by offering the highest standard of service, expert debt advice and affordable solutions. Click here to learn more about the Support Service fees.
Only unsecured debts can be included in Bankruptcy, this means debts not secured against your property. Household bills, child maintenance repayments and secured loans are also excluded.
Typical unsecured debts that can be included are credit cards, store cards, personal loans, payday loans, catalogue accounts, bank overdrafts.
If you are a homeowner, your home and valuable assets including car could be sold to help repay your lenders. You will normally be given a period of 12 months to find suitable alternative accommodation if you have children.
You will find it difficult to secure credit if you have been declared bankrupt and you will have to work hard at rebuilding your credit rating in order to borrow in the future.
There are certain times when you will need to tell people that you have been made Bankrupt. For example, when opening a bank or building society account, or if you apply for a mortgage.
Yes your credit rating will be affected in the long term as the Bankruptcy Order will remain on your file for 6 years following Bankruptcy.
You can view a free publication from The Insolvency Service ‘In Debt? Dealing With Your Creditors’ which provides an overview of some of the debt solutions that may be available to you.
Alternatively, if you’re in Northern Ireland, you could look at the Department of Enterprise, Trade and Investments ‘In debt? Dealing with Creditors’ guide, here. Residents of Scotland can also look at the Scottish Governments ‘Debt Advice and Information Package’ guide here.