If you can’t pay your debts any more, a debt solution option for you to consider, may be declaring bankruptcy. Bankruptcy is available for residents of England & Wales and Northern Ireland (in Scotland the equivalent process is known as Sequestration). It is a legal process for you to declare that you are unable to pay your creditors.
Most people have heard of bankruptcy, but many people dismiss it without knowing how beneficial it could be. In some cases declaring bankruptcy may be the best way for you to deal with your debts. As with every option, there are pros and cons to consider before you go ahead. Here are some of the main ones to consider:
- Bankruptcy typically lasts for only 1 year, after which you will be debt free
- Your creditors can’t chase you or contact you
- Fees to go Bankrupt in England and Wales are currently £705, Northern Ireland £647, and in Scotland £200, which is usually comparatively low to the total debt owed
- You can’t be a company director and may be restricted in other jobs, such as civil service and financial roles
- Your valuable assets will likely be sold to pay towards your debts and the record of your bankruptcy is public
- Even through the Bankruptcy typically lasts for only 1 year, the effect on your credit rating is greater and lasts for 6 years in total
If you decide to follow the bankruptcy route, a Trustee will be appointed to manage your bankruptcy who will either be an Official Receiver or an Insolvency Practitioner. Bankruptcy lasts for one year, following which you will be discharged.
The Trustee will manage your debt payments by selling any assets you may have, for example, if you own your home and there is equity in the property, this will be sold to repay your debts.
To declare yourself bankrupt, you have to complete a Bankruptcy Petition (Debtors Petition), and after that has been filed with the court, a date will be set for a court hearing. If the court decides that a Bankruptcy Order should be made, you will be declared bankrupt. If you owe any one of your lenders more than £705, they can file a Bankruptcy Petition (a Creditors’ Petition) and declare you bankrupt – this is known as Involuntary Bankruptcy.
There are other options to bankruptcy such as a Debt Relief Order (DRO), Debt Management Plan (DMP), Individual Voluntary Arrangements (IVA) and more. If you are considering your options, get in touch and we can provide you with professional advice and a plan to move forward. Call Fresh Start UK now on 0800 92 472 44.