What is bankruptcy?
Bankruptcy is a form of insolvency. That means your unsecured debts must be more than your assets (property, vehicles, etc) for bankruptcy to be considered.
If you have assets, like a house, car, savings, antiques or electrical goods that you could sell to clear all your debts, but choose not to, your bankruptcy could be refused. Bankruptcy is one way of dealing with debts you cannot pay. Becoming bankrupt is a very difficult decision and it should only be taken as a last resort.
To be made bankrupt, a court has to issue a bankruptcy order against you. This can happen for 2 reasons:
- You can apply to the court if you’re unable to pay your debts
- Your creditors (the people you owe money to make you bankrupt) if you owe them £750 or more
After you have been declared bankrupt, your creditors will write off your unsecured debts. This allows you to make a fresh start. But there are restrictions for the 12 month period of bankruptcy. You will be notified when it ends, which is called being ‘discharged’.
In order to file for personal bankruptcy in the UK, a fee of £175 is payable to the court, and an additional fee of £525 is payable to the Official Receiver. Under the terms of the bankruptcy, creditors stop charging interest and cannot contact you or take legal action to recover the debt.
Personal bankruptcy is a big step to take and you should not make any move towards making yourself bankrupt before getting expert debt help. We can provide confidential debt advice and identify the best debt solution for your situation. Contact us and find out whether personal bankruptcy is an option for you.
Alternatives to bankruptcy
Debt Management Plan (DMP) – We make an initial assessment of your financial standing by considering your income and expenses, we then work out your affordably monthly budget following whcih we negotiate with your creditors. Our aim is to reduce the amount you owe by freezing the interest on your loan and where possible consolidating all your debts into one easy affordable payment.
The advantage of a DMP is it gives you the necessary time to get back on your feet financially but the disadvantage is that you may end up paying more over the longer period of time.
To find out more about DMP.
Individual Voluntary Arrangement - A formal version of the above except we apply to court to give effect to the same agreement.
Administration Orders – Made by a county court. One or more of your creditors must have a court judgment against you and your total debts must be £5000 or less.
Debt Relief Orders – To qualify you must be unable to pay your debts, owe less than £15,000 and your assets must be worth less than £300. You must also have less than £50 per month disposable income, after paying normal living expenses.
To see which of the above is better suited to your needs, please contact us for an initial consultation on 020 8509 2656 or send us an email.