If you are in serious personal debt, bankruptcy can protect you from the creditors you owe money to whilst allowing you have a fresh start. However, it is important to acknowledge the seriousness of bankruptcy as well as the significant consequences that follow it before considering it as a solution as in many cases this should be the last resort.
When filing for bankruptcy a Trustee is appointed by the court to control any of the assets you have which the Trustee may consider being non-essential. Consequently these assets are then sold off and the money raised is used to pay your creditors. You will be entitled to keep your reasonable household effects and a modest vehicle if you can prove the need. Some examples of non-essential assets which the Trustee may sell include expensive jewellery, expensive/secondary cars, shares and any other form of investment. Another item to consider is your home, if there is equity then it is highly likely that this will be realised. Unless you can raise money from, for example, family or friends it is likely to be sold.
Bankruptcy also imposes many restrictions including removal of credit facilities, freezing of bank accounts and for certain professions and extreme cases the risk of censure and/or lose your job.
On most credit applications, lenders will often ask you for details of any previous bankruptcies, therefore after your period of bankruptcy ends you will also find it difficult to get credit or potentially a mortgage. It is also important to bear this in mind when applying for future employment as it can hinder your chances of getting another job.
The average cost of going bankrupt is £600 although this greatly depends on your circumstances. Typically the deposit of £450 will go towards the costs of administering your bankruptcy. This cost is payable in all cases, however the court fee of £150 may be in certain cases relieved by the court if you are on Income Support.
In case that you are a married couple and you are both applying for bankruptcy then the fees are separate and each of you will have to pay your respective fees.
Before going into the bankruptcy domain you should look into other alternatives or seek debt advice. There are wide array of solutions that can work just as effectively as filing for bankruptcy but without the excess luggage solutions like IVA’s a tailored Debt Management Plan, re-mortgage or consolidation loan are all plausible and reachable alternatives that should be explored before making a decision.
Take Debt Advice Group’s Debt Test to find out what is the best solution for you.
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