Thinking of declaring bankruptcy? Unsure how it will affect your future? Quick Loans Express brings you all you need to know about declaring bankruptcy.
What is Bankruptcy?
To declare bankruptcy is ridding yourself of debt. It allows you to have a fresh start if you have more than £5000 of debt. However, the bank will claim some of your assets to pay off the outstanding debt. Both yourself and a company you owe money to can declare bankruptcy. If it is a third party, there is nothing you can do about it.
How to Declare Yourself Bankrupt?
You can apply for bankruptcy via the government’s website. You are required to fill out an application form where you will fill out your details and any debt, income and outgoings. Part of the application involves collecting any bailiff letters and enforcement agent letters.
An official adjudicator from the Insolvency Service will review your application and decide whether you should be made bankrupt within 28 days.
How Much Does it Cost to Go Bankrupt?
It costs £680 to apply for bankruptcy. You will need to pay this before you submit your application. If you do not have any cash available, you may be able to pay in instalments. Contact the Insolvency Service for more details.
Declaring Bankruptcy: Pros and Cons
- A fresh new start
- The day to day pressures of dealing with creditors demands for money are over, and these worries are no longer.
- The officer will leave you enough money to live on and also certain household belongings to work out how to deal with your debts fairly. You may also be required to attend an appointment with the official receiver.
When you are stuck in the debt cycle trying to pay off accumulating interest from short-term loans bad credit, bankruptcy might seem like an oasis in a desert.
- The cost of applying for bankruptcy is £680.
- If you are a high earner, you may be asked to make some debt repayments for the following 3 years.
- Your credit rating will be affected for as long as 6 years. This means you are highly unlikely to be accepted for any type of credit like payday loans direct lender or mortgages.
- You may lose your house, car and other luxury items to pay off outstanding debt.
- You may find the shame of going bankrupt hard to deal with.
- Those at pension age, may find that their savings are taken, leaving them with an unsecured future.
- Some professions do not allow people to continue working if they declare bankruptcy.
- Business owners can see their businesses closed down and the sale of their assets.
- Immigrants may find that their status can be affected and the court will publish a person’s bankruptcy. If a person is concerned that they will suffer a threat of violence through a bankruptcy claim, then their details can be withheld.
What Happens When You Declare Bankruptcy?
After you receive your bankruptcy order, an Official Receiver will be appointed your case within 2 weeks. They will assess:
- your income,
- your assets,
- and your outgoings
Once you have declared bankruptcy, your creditors will have to write a formal request from the official receiver to receive the money owed. The creditor can not ask you to repay any money you may owe them, and you are not required to repay them. However, you will still need to repay student loans and court fines.
Once your debt has been repaid, usually after a year or so, you are ready to make a fresh start. Until you receive your official discharge from bankruptcy, the full restrictions of bankruptcy apply. For example; you can’t borrow more than £500 in credit and interest is likely to be very high. You can find out the end of your bankruptcy restrictions here. Finally, going bankrupt will inevitably affect your credit score for a minimum of 6 years and that can stop you getting small loans UK in the future.
Who is Bankruptcy Suitable for?
The bankruptcy option is suitable for people who have debt and have no way of repaying the money. However, it depends on the assets you have. If you own a home, it might be worth your while searching for other solutions as it may be taken away from you to pay off your debt. If you owe your landlord rent arrears, you face the risk of eviction if you declare bankruptcy.
Declaring bankruptcy is no light decision. It is essential you approach a debt advisor before taking this massive step.
Can I Be Made Bankrupt?
Yes, if you owe more than £5000 to a creditor they can declare you bankrupt. However, creditors are unlikely to use this route to get their money back. If you are made bankrupt by a company, you can find out all you need to know on the government website or call national debtline.
Get Free Advice About Bankruptcy
Before making a decision over declaring bankruptcy you must discuss your plans with a financial advisor. Going bankrupt will have many repercussions on your future finances and your credit score, and it should not be taken lightly.
Declaring bankruptcy is not an option for everyone. If you are struggling with debt, there are many debt advisory services that will help you form a repayment plan and find other solutions.