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The effects of bankruptcy

There are many consequences to consider before you make a final decision on whether or not bankruptcy is the best way forward. Although deciding to declare bankruptcy is often the initial reaction of people facing serious debts, bankruptcy can be a poor choice and it often makes more sense to pursue a different solution. Probably the most common realistic alternative for people who would otherwise have to go bankrupt is the Individual Voluntary Arrangement (IVA).

These are some of the effects of bankruptcy you will need to consider before making a decision. The ClearStart online application process or helpline can help if you need to know more about your own circumstances.

Your credit rating

If you have been made bankrupt then you have to declare your status when applying for credit of £500 or more. Failure to do this is a criminal offence. The effect that bankruptcy can have on your credit rating can make it very difficult to conduct business, because receiving credit will be virtually impossible.

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 as well as assets such as cars over a certain value.

Your business or employment

If you run your own business then it will usually be closed down and your employees dismissed as soon as the Bankruptcy Order has been made. Any remaining business assets will be taken over by the Trustee along with your accounting records. It will be possible to start trading again as long as you follow certain guidelines, including trading under the name in which you were made bankrupt and applying for a new VAT number.

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.

Your home

The aftermath of bankruptcy can have a negative effect on both homeowners and tenants. For homeowners, the difficulty involved in borrowing money after bankruptcy can make moving house difficult. For tenants, raising a deposit or making advance rental payments can be made awkward by the inability to borrow.

Your reputation

As bankruptcy is so public it can have a profound effect on your reputation. Bankruptcies are published in the local papers and in the London Gazette. Bankruptcy proceedings are also held in open court.

Further reading:
Bankruptcy | Bankruptcy process | Bankruptcy Law | Alternatives to Bankruptcy | Effects of Bankruptcy | Bankruptcy vs IVA | Disadvantages of Bankruptcy | Bankruptcy FAQs

Three steps to a better future

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