The Effects of Bankruptcy
1. The Effect of Bankruptcy on Your Credit Rating
If you have been declared bankrupt then you have to declare your status when applying for credit of £500. Failure to do so is a criminal offence.
The effect that bankruptcy can have on your credit rating can make it very difficult to conduct business as receiving credit will be virtually impossible.
2. The Effect of Bankruptcy on Your Assets
Once a Bankruptcy Order has been made against you, your assets are handed over to the trustee and can be sold to pay your creditors. This includes your home.
3. The Effect of Bankruptcy in Relation to Your Creditors
If you are declared bankrupt then you are not allowed to make any payments directly to your creditors. Instead, any creditors to whom you owe money have to make a claim to your trustee.
4. The Effect of Bankruptcy on Your Business or Employment Status
If you run your own business then your business is usually closed down and your employees are dismissed as soon as the Bankruptcy Order has been made. If you have any business assets, these will be taken over by the trustee along with your accounting records.
However, you can start to trade again as long as you follow certain guidelines. You may only trade under the name in which you were made bankrupt and you have to apply for a new VAT number.
Bankruptcy also affects your employment status. As a bankrupt person, there are certain positions that you cannot hold. You cannot be a Company Director, MP, Councillor, Estate Agent or Magistrate. There are also certain types of jobs that bankrupts find it difficult to get. These include security, law related and accountancy jobs.
5. The Effect of Bankruptcy on Your Home
Bankruptcy can have a negative affect on homeowners and tenants. For homeowners the difficulty involved in borrowing money can make moving house difficult. Whilst for tenants raising a deposit or making advance rental payments can be made awkward by the inability to borrow.
The Effect of Bankruptcy on Your Reputation
As bankruptcy is so public it can have a profound affect on your reputation. All bankruptcies are published in the bankrupt's local papers and in the London Gazette and bankruptcy proceedings are held in open court.
How to Avoid Bankruptcy
Being declared bankrupt can be traumatic and can introduce a variety of long term negative effects. Therefore it should be avoided if at all possible.
If you can afford to collect together as little as £250 a month you may be able to qualify for an IVA instead of having to resort to bankruptcy.
The IVA (Individual Voluntary Arrangement) was introduced by the Insolvency Act of 1986 as an alternative to bankruptcy.
With an IVA your creditors agree to write off a proportion of your debt (often as much as 70%) in return for regular monthly payments over an extended period of time. These repayments are based on what you can afford to pay and can be as low as £250 a month.
Unlike with bankruptcy, if you set up an IVA:
- There is no social stigma as an IVA is confidential
- You will not face professional disqualification
- You can still hold public office
- You can keep your assets
- You will find that the costs are much lower than for bankruptcy
If you would like to speak to a debt adviser, free of charge about how you might be able to avoid bankruptcy then please click the link below and complete the contact form:
Click Here: Free Debt Advice to Help You Avoid Bankruptcy
To contact an advisor call 0800 954 6241. Alternatively complete an online enquiry form and an advisor will call you back at the time that you specify.