Is bankruptcy the right option for me?
Most debt advice companies will steer you away from bankruptcy and only ever highlight the downsides. At Money Advice & Debt Help however, we want people to explore all their options and understand that bankruptcy can actually be an effective way to deal with debt.
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Although still a huge decision, the bankruptcy process is now much more straightforward and less intrusive than people think. If you are in receipt of state benefits and have no significant assets then it is something you should seriously consider.
It is likely that someone in such a position would pay nothing in bankruptcy and be discharged and debt free within 12 months. As such if you have a serious amount of debt and are under pressure then this could well be the best way forward.
If you are receiving benefit then the fees involved are also normally reduced. For those employed or owning their own home bankruptcy is a more difficult decision and whilst it should still be considered you should also be aware of the following:
- If you are working and the Official Receiver believes you have sufficient income (over and above the basic needs of your household) then he may request an attachment of earnings be made with this money then being distributed to your creditors. These payments usually last for 3 years and of course your employer will have to be informed as well so that this can be set up.
- If the Official Receiver believes you have taken on debt knowing that you will be applying for bankruptcy then he can impose a Bankruptcy Restriction Order (BRO) which can last up to 15 years and make running your own business or obtaining credit almost impossible.
- If the Official Receiver believes you have sufficient equity in your home to pay off your debts then he could force your property to be sold. Initially he would usually ask a spouse to buy out his share of the property (as soon as you are declared bankrupt all of your assets immediately transfer to the Official Receiver) but if that is not possible then after 12 months of the Bankruptcy Order the property could be repossessed and sold.
- If there is clearly no equity available or often if children are in the home then you may escape repossession but unfortunately that does not mean that the matter is closed. At this point the Official Receiver will normally seek a charging order on the property instead which effectively means he has secured his interest in the property long term. If the property is sold at a later date he will then expect this charge to be settled and the original creditors will finally be paid off along with his fees.
Bankruptcy is certainly a big decision and a lot depends on the income you have and the assets you own. The information above is simply designed to highlight some of the major issues and it is important to remember that everybody’s circumstances are different.
By calling our freephone number 0800 622 6824 or completing the express enquiry form we will be able to explain the procedure in far more detail and show what impact bankruptcy will have on you. If you then decide to go bankrupt we can even help you with the paperwork.
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