BANKRUPTCY
Bankruptcy is normally seen as the last resort for dealing with debt. If you have debts which you just cannot afford to repay, then you can declare yourself bankrupt.
You must present a completed application form at your local County Court (or the High Court if you live in London). If the Court agrees that you are insolvent (not in a position to repay your debt), then you will be declared bankrupt on the same day. All your debts will then be taken away from you and you will no longer be responsible for repaying them.
Once you are declared bankrupt, you must no longer try and deal with your creditors yourself. All future dealings will be undertaken by the Court on your behalf. Your creditors can no longer demand payments directly from you by law.
ADVANTAGES OF BANKRUPTCY
· The responsibility for paying your debts is taken away from you.
· You will normally be Bankrupt for just 12 months. After that period you will be discharged.
· If you can afford to do so, you will have to make monthly payments towards your debt for 3 years. However, after these payments are completed, any outstanding debt will be written off by law.
· If you declared bankrupt, you will be allowed to keep reasonable household items. You will not have to give up reasonable goods such as your washing machine, fridge freezer, television and DVD player.
DISADVANTAGES OF BANKRUPTCY
· If you are declared bankrupt, your name and address will be published in the local newspaper and the London Gazette.
· The record of your bankruptcy remains on your credit file for 6 years meaning it will be difficult to obtain further credit during this time. After 6 years, you can borrow again. However, it may take some time for your credit rating to repair.
· You will have to give up your share of any equity you have in a property. This may result in the sale of the property unless a friend or family member can raise a similar sum on your behalf which can be given to the Court in lieu of your equity.
· You may have to trade in a car worth more than £1000.
· You are unable to act as a company director or be involved with the management of a limited company while you are bankrupt.