Bankruptcy is seen as the last resort, perceived to be the only way to escape the ever-constant demands for payment from lenders as well debt collectors/credit companies etc. for unsecured debt. But bankruptcy in our opinion is an easy option nowadays and we are specialists in this field 

The main factors for you to look at, is your house (If you own it or have a mortgage) and any assets you have (like a car worth more than £1,500 - £2,000 at auction price) that are out of the ordinary from normal living standards, as well as any spare income you may have after standard guidelines on expenditure have been taken into account.

What we mean by this is: for the average person, no one will visit your home, no Debt Collectors or Bailiffs will remove goods, phone calls will stop and once a Creditor/Collector has been informed you are bankrupt, no harrasment is allowed what so ever, as its against the law once you have been declared insolvent.

The constraints once you are bankrupt are persived by many in the industry (Creditors as well as some Debt Managment and Insolvency Companies) as extreme! The worst thing you could do! The worst decision you could ever make! They will take everything you have! Your name goes in the local paper! etc. etc. etc. etc.

NOW THE TRUTH - IT'S NOT! and don’t let anyone put the fear of god into you!

The restrictions while bankrupt are: You are not allowed to be an MP, a solicitor or an accountant and you can’t be a company director (you can once discharged) So where is the fear? How many people come under the above categories?

Who can go bankrupt? 

Anyone can go bankrupt if they have debts of more than £5,000. Although before doing so, you must make sure that your job is safe in certain sectors for instance being a solicitor, accountant or working in some financial service sectors.

The Risk to your Current Assets

With bankruptcy your assets (property, shares, anything of real value) can be sold to pay your creditors. But once again there is a fear factor that everything will be taken. This is completely un true, there is a very good possibility that you can still keep your home if you have negative equity, or none at all, but even having £5/10,000 of equity doesn't mean you will lose your home. Going bankruptcy is a more sensible option for people who don’t own any assets but talk to us about what you have, what your worried about, we have many of the answers to your concerns, so call us.

Only the property owned by the debtor is directly at risk. Jointly-owned property (such as the family home) may be sold by the trustee although now they might apply for a charging order for the equity to be released when the property is sold or remortgaged in the future if a third party can't pay the sum agreed, but the sum has to be agreed technically with the non bankrupt/ third party regarding valuation etc. to realise the value of the debtor's share but please talk to us as there can be ways of resolving this matter.

The Risk to Your Future Assets.

Where the debtor expects to receive an inheritance (within bankruptcy) or has assets, consideration will be taken to any increase in value they may have whilst a bankruptcy order is in place.

If you are self employed and want to continue while bankrupt, you can if the Official Receivers have no objections/problems with their investigation. If its accepted then the  tools of your trade are safe. e.g. vehicle for work such as van or car, tools for doing your work etc.

The Effect on Your Future Credit.

An un-discharged bankrupt must declare his status when seeking credit of more than £500, including hire purchase and conditional sale agreements. It is an offence not to do so.

Attempting to run a business can be hampered by being an un discharged bankrupt, since credit will not be allowed. Whilst utility companies cannot insist on payment of pre-bankruptcy arrears as a condition of continuing supply, they will usually require a security deposit (garantor) and might insist a pre-payment meter is fitted. 

Effect on Your Employment

This area gets the director of Action for Debt very annoyed when it comes to this question. It is not a criminal offence and you don’t have to tell your employer that you have gone bankrupt (Unless you are in financial services), but this doesn’t mean you can’t be a cashier working for a bank. Again contact us as we know all there needs to know about this subject.

The Effect on Your House.

If you have a property and you have no or very little equity in the property, you will most likely be able to keep it. Although you should read the directors book coming out in March 2011 as there are a lot of issues to look at. One is that you will not be able to remortgage easily for many years due to the economic climate and your credit history will show you have been bankrupt for 6 years.

The majorities of tenants don’t have to worry and will be able to stay in their home, but please look at your tenancy agreement regarding any clause regarding bankruptcy. Again there are more details in the book just mentioned above.

The Effect on Your Reputation and Stress.

The process of declaring bankruptcy can be very stressful. All I ask my clients is: Have you tried your best to resolve your debt? And if you have, hold your head up high.

Nowadays your name only goes in the London Gazette (not the local paper anymore) notifying of a person's bankruptcy. The details can also be found online at the Public Register maintained by the Insolvency Service. It has to go in by law, although it is an old fashioned one at that. 

For many there is still a stigma attached to declaring bankruptcy and debtors can be made to feel like criminals, Please note it is not and you can go on holiday as well as emigrate.

Do You Have the Resources?

Just like an IVA, there are large fees to pay when you are declaring yourself bankrupt.

At present there are two: One for £450 Official Receivers fees that everyone has to pay whether there working or not. The other is a court fee of £150 but if you are unemployed or on certain benefits you might be exempt from this fee, although the household income is taken into account not just the bankrupts.

Do you have to see a Judge?

Although previously to a few years ago most people had to see a judge. Don’t worry, as you will see a Judge who is usually dressed in a suit as if they are a solicitor. (They are not in red capes and a wigs)

You will be seen in a private room (Just you and the Judge) and they will be asked a few basic questions, there not there to tell you off or call your names and generally you’re out within 3 minutes. There again there are a lot of courts now where you hand your paperwork into the court and told to come back later that day to collect your certificate of bankruptcy. The Royal Courts of Justice in London do this. We have hopefully one of the most up lists on weather you see a judge or not. Contact us.

If you need help or advice with anything mentioned on this page please call us on 0845 643 7820