Bankruptcy: the basics | A Personal Finance Guide

April 5th, 2012 Filed under: Personal Finance ? Finance Author

If you have unsecured debts that you simply can?t afford to pay back in the foreseeable future, entering bankruptcy could be the best way of getting on top of the problem.

As bankruptcy will have a serious impact on your finances, it?s vital to get bankruptcy advice before making a decision. A debt expert will only recommend bankruptcy after all other approaches have first been considered.

But although it?s a ?last resort?, bankruptcy can be an ideal approach for some seriously struggling borrowers.

Let?s take a look at the basic things you should know about bankruptcy.

What is bankruptcy?

Bankruptcy is a formal insolvency solution, which can only be agreed through the courts.

It can cost up to ?700 in total to be made bankrupt (including a ?175 court fee, which can be waived in some instances: for example, if you?re on a low income) ? although in Scotland, where bankruptcy is sometimes known as ?sequestration?, the bankruptcy fee is ?100.

Visit www.debtadvicenow.co.uk/ for more information.

How does bankruptcy work?

To enter bankruptcy, you must apply to a County Court for your case to be assessed.

Once your bankruptcy is agreed, you will:

• Make regular payments of whatever you can afford (which could be nothing) for a period of up to three years
• Be protected from any further legal action from your unsecured lenders
• Have whatever remaining unsecured debt you can?t afford to repay written off once you?ve been successfully discharged: usually after 12 months.

During your bankruptcy, you?ll have to hand over your ?estate? ? which includes your home and any non-essential possessions ? to your Official Receiver/Trustee, who will oversee your bankruptcy right up to its conclusion.

Any items in your estate could be sold if necessary, and the money used to go towards your payments into your bankruptcy.

How will bankruptcy affect me?

Bankruptcy will damage your credit rating for six years from the day it begins, and will also stop you working in certain professions, e.g. as the managing director of a company.

Speak to a debt adviser to find out more.

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