Bankruptcy is formal insolvency process for people struggling with debt in England, Northern Ireland and Wales. Those living in Scotland will have to apply for sequestration, which is legally a very similar process. Bankruptcy is undoubtedly a viable way of wiping out your debt and starting again, but other options should be considered first as the process can put your important assets, such as your car and house, in danger.
Am I Eligible for Bankruptcy?
If you meet the following criteria, then bankruptcy may be a viable option for regaining control of your finances.
- You are unable to pay your debts due to the money you owe far outweighing the assets you have.
- You don’t have the disposable income to qualify for an alternative debt management scheme.
- Your situation isn’t improving or is getting worse, and this is likely to continue.
There is no escaping from the fact that bankruptcy is a last resort. In some cases, it can undoubtedly be a good way to make wipe off all of all of your debt and make a fresh financial start while getting relief from creditor harassment during the process. However, it is not a decision that you should take lightly and every situation is different.
What Are the Advantages and Disadvantages of Declaring Bankruptcy?
- Bankruptcy is a way to wipe off 100% of your personal debt relatively quickly, usually in the space of a year with full cooperation.
- As soon as the bankruptcy process begins, creditors can no longer harass you. They are also prohibited from taking any further action against you to collect their debts as the arrangement is legally binding.
- If you own your own home but have little equity on it we may be able to protect your property.
- Most of your assets will be in danger of being sold, including your house if it is likely to make a significant profit. If your vehicle is worth over £1000 then it is also likely to be sold.
- Filing for bankruptcy will remain on your credit rating for six years meaning it will be difficult to borrow money immediately after your fresh start.
- It costs a total of £680 to make the application that can be an unrealistic figure for those struggling with enough debt to consider filing for bankruptcy.
- Bankruptcy can affect your ability to work in certain professions. You will not be allowed to become a company director or various other roles in financial services.