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Bankruptcy
Bankruptcy is an option open to UK individuals and households who are insolvent (in other words, people who cannot pay off their debts). You can file for bankruptcy voluntarily, or it can be asked for by a creditor if you owe more than £750.
The bankruptcy process involves several stages: if you are declared bankrupt then a court will order the sale of your assets to repay your creditors. Growing numbers of people are seeking alternatives to bankruptcy in the UK because it is an extreme option, with implications that many wish to avoid. For example, homes and cars can be taken away and it can be extremely difficult to get credit or a mortgage after bankruptcy.
When is bankruptcy suitable?
As a general rule, you should do whatever is possible to avoid bankruptcy and many people find that options such as an IVA are a far better solution. ClearStart will always work hard to explore every option open to you so that bankruptcy is a last resort.
However, there are circumstances when bankruptcy can be the only choice. In particular, you may need to consider it seriously if
- there is no chance of being able to set up an alternative such as an IVA
- you have no assets and no available income
- you have retired, or you have no future need for credit.
The main benefit of bankruptcy is that your debt problems are resolved and restrictions placed on you last for a maximum of 36 months. Monthly payments during the bankruptcy are set at an affordable level.
There are, however, many drawbacks too. In particular:
- you may have to sell your home and other assets such as cars
- you cannot get credit during the period of bankruptcy
- credit is very difficult or expensive to get afterwards
- a Bankruptcy Order is controlled by the Official Receiver and the court magistrate
- a bankrupt cannot have certain careers or be a director of a company
- your situation will be made public
Bankruptcy can look like a cheaper option at first, but bear in mind that you may find it impossible to own a house in the future and some careers will be closed to you. A bankruptcy also does not clear any student loans you might have.
ClearStart can help you to establish whether or not bankruptcy is the best choice for you. If it is, you can be sure of a clear and impartial answer.