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BANKRUPTCY
  >Is Bankruptcy right for me?

Who Can declare themselves Bankrupt?

You can only declare yourself Bankrupt if you are truly insolvent. I.e. if you do not have enough money each month to cover both your reasonable living expenses and your debt repayments and / or the total amount of your assets is less than the total amount of your debt.

Homeowners: If the equity you own in your property is greater than the amount of debt, then you are not insolvent and should generally avoid Bankruptcy.

Will Your Job Be Effected If you Declare Bankruptcy?

There are various professions which will not allow you to continue to practice while you are a Bankrupt person. These include: Lawyers, Chartered Accountants, or many positions within the Financial Services industry. You will also be prevented from being a Member of Parliament, Justice Of The Peace or Local Authority member while you are a Bankrupt person.

If you are a member of the Police Force or Armed Forces, declaring Bankruptcy may have an adverse effect on your career. Before declaring Bankruptcy, you MUST discuss your circumstances with your personnel department or a superior.

As a Bankrupt person, you can not operate as a Limited Company Director or be involved in the promotion, formation or management of a Limited Company without permission from the Court. If you are currently in such a position, you must think very carefully before declaring yourself Bankrupt.

Where do you Live?

Bankruptcy is only available for people who are resident in England and Wales. If you live in Scotland or the Channel Islands, then different rules and law apply. You should seek separate advice from the local CAB.

When Would you Decide to Declare Bankruptcy?

By and large, most people who declare Bankruptcy have no alternative. They would usually have tried informal solutions such as Informal Repayments and Debt Consolidation, and found that their problems remain unsolved. They might also have considered the possibility of an IVA, and found that they could not afford the repayments that it requires. Once all these options are exhausted, the only thing left to do is declare Bankruptcy.

Sometimes people who are eligible for other solutions such as IVAs nevertheless decide to declare Bankruptcy. Pensioners, for example, and those living on State Benefits, will usually be financially better off if they declare Bankruptcy. They will probably be discharged in less than one year, and it is likely that they will not be subject to an Income Payment Order. Therefore for these people, Bankruptcy might be more attractive than an IVA.

Other people who opt for Bankruptcy rather than an IVA usually do so because they have no significant assets to lose. In addition, if their job is not affected by Bankruptcy, they are not worried about having a poor credit rating and are not concerned about having their name in the papers, (i.e. the main disadvantages of going Bankrupt do not apply).

Will my Spouse / Partner be affected by my Bankruptcy?

If your financial affairs are separate, the answer is no. Assets which are truly in your Spouse or Partner’s name can not be taken into account if you declare Bankruptcy.

If you declare Bankruptcy, a third party who lives at the same address as you may experience problems with their credit file. Unfortunately it is common for information to creep from one person’s credit file to another’s, especially if they share the same address. In order to prevent this from happening, the third party must contact one of the credit reference agencies (Experian or Equifax) and ask them to ‘create a disassociation’. This means that your information will be removed from their file, and their information removed from yours. To do this, you must give Experian or Equifax your full names and dates of birth, as well as details of your relationship and any shared addresses.

Can I go Bankrupt more than once?

Yes. However, if you declare Bankruptcy a second time, the period of your Bankruptcy Order is likely to last more than 12 months and your Income Payment Order may be extended too.

Advantages and disadvantages of Bankruptcy

Bankruptcy: the advantages

  • If you go Bankrupt, all of your debts will be taken away from you and you will no longer be responsible for repaying them.
  • After twelve months you will be ‘discharged’ from Bankruptcy, and the Bankruptcy restrictions will be lifted. Any money outstanding will be written off, except for Student Loans and non-dischargeable debts.
  • Even though your house and car may be at risk, your reasonable household goods are safe – nobody will be knocking on your door to seize your DVD player, sofa, fridge or washing machine.
  • Your payment plan to the Court usually lasts only for three years – that’s two years less than an IVA.

Bankruptcy: the disadvantages

Bankruptcy is a public affair; your name will be published both in your local newspaper and the London Gazette.

  • You may be required to make a contribution from any monthly disposable income over and above £99 to the Court, usually for 3 years.
  • Your credit rating is significantly damaged; the record of your Bankruptcy will remain on your credit file for six years.  
  • Debts to the Student Loans Company cannot be included, and will remain after you have been discharged.
  • You may have to give up control of your house and assets but reasonable household items and cars valued to a maximum £2500 should not be affected.

-Bankruptcyhelp Info: What is Bankruptcy?
-Bankruptcyhelp Info: Is Bankruptcy right for me?
-Bankruptcyhelp Info: How to declare Bankruptcy?
-Bankruptcyhelp Info: What happens to my assets?
-Bankruptcyhelp Info: Bankruptcy and bank accounts
-Bankruptcyhelp Info: Bankruptcy and credit rating
-Bankruptcyhelp Info: Bankruptcy and Trust Deeds in Scotland

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