Bankruptcy

What Is Bankruptcy?

 

What Is Bankruptcy?

Bankruptcy is a formal insolvency process for those who can no longer afford to repay any of their debts. You can either voluntarily choose to make yourself bankrupt, or one or more of your creditors may ask the court to make you bankrupt. Bankruptcy is a very serious option which can have very serious consequences to your financial future, so must be carefully considered before you decide to pursue it.

Criteria

Anyone in England, Wales or Northern Ireland can decide to make themselves bankrupt – for residents of Scotland, ‘Sequestration’ is a similar option, however Scotland has its own laws and therefore the criteria, advantages and disadvantages are not exactly the same. There is no qualifying criteria or minimum debt level – anyone can make themselves bankrupt. The fee to make yourself bankrupt is £680, which can be paid in instalments, but the full fee must be paid before your bankruptcy process can begin.
If one of your creditors wishes to make you bankrupt, you must owe them a minimum of £5000 before they can petition for this.
 

Advantages and Benefits

  • Once your bankruptcy is discharged, all included debts are written off
  • Bankruptcy will prevent your included creditors from taking or continuing with any legal action
  • All interest and charges on included debts will be frozen
  • You can be discharged after 12 months
  • You can pay the fee online in instalments and your bankruptcy application will begin once your fee has been paid in full

Disadvantages and Potential Consequences

  • Once you are declared bankrupt, an Official Receiver or Trustee will take control of your estate which could result in any assets being sold, including your home if you are a homeowner, your car or any other high-value assets, to put towards your debts
  • There are certain debts that cannot be included in a bankruptcy, such as student loans, CSA arrears and court fines
  • Bankruptcy costs £680 per person
  • Bankruptcy will adversely affect your credit rating and your ability to gain credit will be limited. The bankruptcy will remain on your credit file for 6 years
  • If you can afford to make a payment, you will be asked to do so for up to 3 years