Bankruptcy

Declaring Bankruptcy

Those with the desire for financial relief often consider the process of Bankruptcy, to escape the stress and strain of debts weighing them down.

Declaring Bankruptcy is a serious step but is a process which allows you to write off unmanageable debts, it can offer a clear route to financial recovery.

What is Bankruptcy?

Bankruptcy is a form of insolvency. As a legally binding solution, it allows you the opportunity to clear and write-off your debt, but carries the risk of your assets being sold to repay what you owe.

For many, Bankruptcy is what causes the greatest fear when experiencing financial difficulties – however, it offers a genuine solution to unmanageable debt, and in certain circumstances may even be a favoured option.

Bankruptcy is available to those living in England, Wales and Northern Ireland, while those who require a similar solution in Scotland can choose Sequestration. The process of Bankruptcy can last 1 year, although cases can be longer or shorter.

Benefits of Bankruptcy

Although Bankruptcy is a drastic solution it has various advantages. Depending on your circumstances, it could be the right financial recovery option for you. These advantages include:

Legal protection

A bankruptcy order, which formally acknowledges your insolvency, offers protection from your creditors, meaning they can no longer use legal action to force you to repay what you owe.

Breathing space

By entering Bankruptcy, you will no longer have to deal directly with your creditors, handle stressful correspondence or negotiate with them.

Debt waiving

Unsecured debts you have defaulted on may be written off during the Bankruptcy process, allowing you to reduce the level of debt you owe.

Charges halted

During the process of Bankruptcy fees, charges and penalties are suspended. This means that there is no interest added to the amount you owe or extra charges incurred during this solution– unless there is sufficient monies to pay everyone.

Downsides to Bankruptcy

Despite its many benefits, Bankruptcy remains the last resort for those struggling with debt, as it can have a lasting impact on your financial situation.

Risks may include:

Liquidation of assets

To make repayments to your creditors, you may be required to sell some of your possessions, such as your home or car.

Credit rating

Declaring Bankruptcy will affect your credit rating. Although debts can be cleared at the end of the process, Bankruptcy will remain on your record for 6 years, making it difficult to source many forms of credit.

Personal status

By declaring Bankruptcy you may be barred from certain professions of public offices. Jobs such as those in legal and financial sectors do not allow those who have become bankrupt to continue in the profession.

Loss of privacy

Bankruptcy requires to be publicly registered. If you enter Bankruptcy, your name will appear in the public Individual Insolvency Register and it will be advertised in the London or Belfast Gazettes (or Edinburgh Gazette for sequestration).

Is Bankruptcy the best option for me?

Bankruptcy is a serious solution to a serious problem, and while it can lead you to financial recovery, the lasting effects may mean that you may also like to pursue other solutions.

However, if you are unable to repay your debts and seem unlikely to be able to make repayments in a reasonable time, it is a way of taking control of your debt.

How do I apply for Bankruptcy?

You must formally apply for Bankruptcy. The fee of applying is £680, and while it can be done directly through the UK Government (https://www.gov.uk/apply-for-bankruptcy), we highly recommend doing it with the support of an expert and we can put you in touch with an FCA regulated organisation to help you with this if you wish.

To start with this process, you will need to gather all your financial records, pay slips, debts owed and budget, and understand how these will impact the process of Bankruptcy for your unique situation.

The fee does not have to be paid all at once, however, it MUST be paid in full prior to your application being submitted.