Is Bankruptcy Right for You?
by Startacus Admin
Becoming bankrupt can actually be a huge relief to some people with serious debt problems, but it’s not the right solution for everyone, especially as it can have long-lasting effects on your personal and work life.
If you’re wondering whether it’s the right step for you, a visit here should help you to work it out.
Bankruptcy may be right for you if:
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you can't see a reasonable way to pay off your debts;
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you don’t own much of any value and there’s no or very little equity in your home;
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your situation isn’t likely to improve any time soon, and
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you live or have a business in England or Wales, or you have done within the last three years and now live permanently in another EU state (Denmark excluded).
There’s no minimum amount of debt that qualifies for bankruptcy proceedings. If your unsecured debts are more than the value of your property, then it’s definitely a potential solution.
Bankruptcy may not be right for you if:
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your debts are less than £20,000 and your belongings – other than household essentials and a vehicle worth less than £1,000 – aren’t worth more than £1,000 in total. In these circumstances a debt relief order may be more appropriate;
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you’re a solicitor, an estate agent, an accountant or similar, as your professional association might bar bankrupt people from membership;
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you want to keep your debt problems private;
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your circumstances might improve in the near future; you may be waiting for an inheritance, or expecting a PPI pay-out, for example and this money can help you to pay off your debts, and
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your pension pot is worth more than your debt.
Other things to consider
You need to think about the knock-on effects of bankruptcy before proceeding.
Can you afford the fee?
It costs £680 to file for bankruptcy, so you need to think about if and how you can pay this.
You may lose your home
If you own your home it may be sold to pay your creditors.
If you rent, you’re “safer” as long as your tenancy agreement doesn’t prohibit bankrupt people. You might find it harder to find a new tenancy as most letting agencies perform credit checks.
Future access to credit
Bankruptcy has a severe effect on your credit rating so you could face several years of difficulty when it comes to getting credit, a mortgage or running a business.
Your belongings
Anything you own other than essential household items and a vehicle that’s worth less than £1,000 may be sold to pay your creditors.
You’ll face other restrictions
After you’re declared bankrupt and before you’re discharged (this takes one year) you have to follow certain rules related to your work and financial life.
You still have to deal with debts that aren’t covered by bankruptcy
Some debts, like magistrate court fines and student loans, aren’t covered by bankruptcy and these creditors can still pursue you during your bankruptcy period. You need to work out how to pay these debts down.
Your bankruptcy will be public knowledge
Bankruptcies are listed in public records that can be seen by anyone. If you worry that you or your family could be at risk of violence if your details are published then you can ask for a court order to prevent it.
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Published on: 7th January 2019
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