Like many so many others, are you living the type of lifestyle that could put you and possibly your family on the road to bankruptcy? The recent financial crisis prompted a sharp rise in the number of people becoming bankrupt. The rising costs coupled with squeezed incomes and wide-scale redundancies forced individuals to desperate measures to resolve debt problems. However, the danger of bankruptcy is ever-present even in the most productive economic climates.
What Is Bankruptcy?
If you have a debt problem, one of your options for sorting it out might be bankruptcy. You can apply for bankruptcy if you can’t pay back your debts.
As well as applying for bankruptcy yourself, someone else you owe money to (a creditor) can apply to make you bankrupt, even if you don’t want them to. For a creditor to make you bankrupt, you must owe at least £5,000. Remember, bankruptcy might not be your only option and it might not be the best one for you. One of your other options might be a debt relief order. You could be able to apply for a debt relief order if you have debts, income and property below a certain amount.
Sometimes an IVA is a suitable solution for people with debt problems and considering bankruptcy, however, should the IVA fail then bankruptcy may be applicable. The bankruptcy debt solution is only available for people who live in England, Wales and Northern Ireland. The Scottish equivalent is sequestration
What Are The Advantages Of Going Bankrupt
When the bankruptcy order is over you can make a fresh start – in many cases this can be after a year. Other advantages of going bankrupt include:
- You will be completely cleared of many debts but not damages for personal injuries; family liabilities, such as maintenance arrears; liabilities under criminal law, such as fines or frauds; student loans; and some benefits among others
- The pressure is taken off you because you don’t have to deal with your creditors
- You’re allowed to keep certain things, like household goods and a reasonable amount to live on
- Creditors have to stop most types of court action to get their money back following a bankruptcy order
- The money you owe can usually be written off
What Are The Disadvantages Of Going Bankrupt
- There is a cost attached to entering a bankruptcy. This cost is currently, £655 which are split between the administration fee (£525) and the application fee (£130). This fee must be paid when you submit your application or you can make payments to save for your bankruptcy.
- People could find out, as the bankruptcy will be advertised in your local paper and the London Gazette
- If your income is high enough, you’ll be asked to make payments towards your debts for 3 years
- It will be more difficult to take out credit while you’re bankrupt and your credit rating will be affected for 6 years
- If you own your home, it might have to be sold (but you may be able to apply to your local authority for re-housing)
- Some of your possessions might have to be sold, for example, your car and any luxury items you own
- If you are or are about to be, the right age to get your pension savings, these might be taken
- Some professions don’t let people who have been made bankrupt carry on working
- If you own a business it might be closed down and the assets sold off
- Going bankrupt can affect your immigration status
Signs YOU may be on the road to bankruptcy:
You don’t have a budget.
Debtors who don’t have budgets usually don’t know how much money is coming in and most importantly how much is going out. Living your life without a budget is much like going to sail in the ocean without a map. Failure to have a budget will definitely put you on the road to bankruptcy.
Your debt isn’t getting smaller each month, in fact, it is getting bigger.
If you notice that your debt load has increased since we rang in the New Year, then you are probably already on the road to bankruptcy. Eventually, you will not be able to maintain payments on your growing debt and creditors will begin to refuse you new credit and may even pull back on existing credit access.
Your home and/or car is very expensive and requires a large percentage of your income.
As we have learned since the recession, having too much house (or car) can put even the most diligent of us onto the road to bankruptcy. Many debtors find that their secured loan payments get out of control and they simply cannot maintain them especially in the times of crises. Savvy debtors scale back on their secured debt so that they can thrive financially and avoid bankruptcy if possible.
Due to the complexities bankruptcy, it is important that you seek experienced legal advice as soon as possible.