What is Bankruptcy?
Bankruptcy is a formal debt solution for those who have an amount of debt which they cannot repay.
In a bankruptcy, most debt types are written off. Deciding to go bankrupt is a very serious step that involves fees and can impact different areas in your life, such as your job or home.
If you live in England, Wales or Northern Ireland and you are struggling to repay debts, you can choose to apply for bankruptcy (if you live in Scotland there are alternative solutions).
You should always check if there are other ways to deal with your debts before you apply for bankruptcy. In the UK, the term ‘bankruptcy’ only applies to individuals, the equivalent terms for insolvency in businesses is ‘administration’ or ‘liquidation’.
Advantages of Bankruptcy
- You can be discharged after 12 months
- Once your bankruptcy is discharged, all included debts are written off
- You can pay the fee online in instalments and your bankruptcy application will begin once your fee has been paid in full
- Bankruptcy will prevent your creditors from taking or continuing with any legal action
- All interest and charges will be frozen
Disadvantages of Bankruptcy
- 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 and the bankruptcy will remain on your credit file for 6 years
- Once you are declared bankrupt an Official Receiver or Trustee will take control of your estate which could result in any assets being sold
- If you can afford to make a payment, you will be asked to do so for up to 3 years
If the adjudicator decides that you should be made bankrupt:
- You will receive a copy of the bankruptcy order and may be interviewed about your situation
- Any assets you have could be used to pay your debts
- Your details will be published in the Individual Insolvency Register
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