There’s no denying that becoming bankrupt can feel like a relief if you’ve been suffering from serious debt for a while. If you’ve been feeling trapped and hopeless then bankruptcy can represent a new start, but it’s not without its downsides because it has serious and lengthy impacts upon your work and personal life.
Ideally, bankruptcy should be a last resort, so visit this website for more information and advice before making your decision, as it may not be the best solution for you.
Bankruptcy might be your best solution if:
- there’s no reasonable way for you to pay off your debts;
- there’s not much equity in your home and you don’t own anything of value;
- your situation is unlikely to improve in the near future, and
- you live in or have a business in England or Wales, or you have done so within the last three years but now live permanently in another EU state (except for Denmark).
There’s actually no minimum amount of debt that qualifies for bankruptcy; it’s applicable if your unsecured debts are more than the value of your property and assets. However, even in these circumstances, it may not be right for you.
Bankruptcy may be unsuitable for you if:
- your debts total less than £20,000 and your possessions (apart from household essentials and a vehicle worth less than £1,000) aren’t worth more than £1,000. A debt relief order may be more appropriate here;
- you’re an accountant, a financial advisor, a solicitor or similar, because some professional associations bar bankrupt people from membership;
- you want to keep your financial problems private;
- your circumstances are likely to improve in the near future, for example you may be waiting for an inheritance which can be used to pay off your debts, and
- your pension savings are worth more than your debt.
Other things you need to consider
You need to think about the consequences of becoming bankrupt before you go ahead.
Can you afford to pay the £680 fee?
You can pay this fee in instalments (starting at £5), but in some circumstances you’ll need to pay it all in one go.
You might lose your home
If you own your property it may be sold to pay your creditors.
You’re safer with a tenancy agreement, as long as it doesn’t prohibit bankrupt people. It may be harder to find new tenancies, though, as letting agencies do credit checks.
Your future access to credit
Bankruptcy could mean several years of obstacles to getting credit, a mortgage or starting a new business.
You can keep essential household items and a vehicle worth under £1,000, but everything else may be sold off to pay your debts.
There are other restrictions
You’ll be bankrupt for 12 months and during this time you must follow various rules in your work and financial life.
Not all debts are covered by bankruptcy
Debts like magistrate court fines, student loans and maintenance payments aren’t covered by bankruptcy so you’ll still have to make arrangements to pay these amounts.
Your bankruptcy will be made public
Bankruptcies are made public as they’re listed in records that anyone can view. If you’re worried that you and your family might be unsafe if your details are published then you can ask for a court order to prevent this.