Everything you need to know about bankruptcy
What is bankruptcy?
Look up ‘bankruptcy’ in the dictionary, and you’re offered a very simple definition: ‘the state of being bankrupt’. But what does it mean? In human terms, you become bankrupt if you are unable to repay your debts. This is often referred to as becoming ‘insolvent’ and puts at risk assets you own such as your house, car or business premises.
After bankruptcy, your remaining unsecured debts are written off. During the 12 month bankruptcy period, restrictions will be put in place but will provide you with a fresh start after the bankruptcy has completed.
Do I qualify for a bankruptcy?
Providing you have lived in England or Wales in the past six months, you are eligible for bankruptcy. If you haven’t, you can present your petition in the High Court.
- Although a bankruptcy filing could reside on your records for as long as ten years, you may find that your credit rating improves following bankruptcy due to some of your debts being discharged during the process
- If you go bankrupt, you will trigger an ‘automatic stay’, which is an injunction stopping all lawsuits and collections against you
- Bankruptcy usually only lasts for twelve months, thus providing a clear line of sight to a debt-free future
- Your assets will be at risk and you may lose some or all of them. This could result in your house or other invaluable possessions being taken from you
- Your credit rating will be severely damaged
- You will have no access to credit above £500 without informing the creditor of your bankruptcy status
- You will not be able to act as a company director or form a limited company
- In certain circumstances restrictions can last up-to 15 years
The Bankruptcy process
Applying for bankruptcy is relatively straightforward. You can do so via your local County Court. All courts vary in how they process such applications, but many will grant bankruptcy on the same day.
We recommend calling your County Court for further information.
Is Bankruptcy right for me?
Start here, before you do anything. There are six simple statements to consider:
- Your financial situation is unlikely to improve in the near future.
- The majority of your debts are unsecured.
- You’re comfortable with the prospect of walking away from your financial obligations.
- You simply don’t have enough income to cover your debt repayments.
- You have no other options.
- You don’t have sufficient assets which could be sold or refinanced to avoid bankruptcy
If the above all ring true, bankruptcy is very likely to be the right thing for you to pursue.
Providing you are comfortable with the disadvantages listed above and the fact that you will have certain sanctions imposed against you for a minimum period of twelve months, bankruptcy may be the best route to a debt-free future. Before deciding anything, we recommend speaking to us for further advice.