How to Manage Bankruptcy

By January 28, 2009Bankruptcy

If you’re facing house repossession, you might also be at risk of bankruptcy. Managing bankruptcy is a stressful, unpleasant process and declaring bankruptcy should be considered a last ditch option for reducing or escaping debt. If you honestly have no other choice, there are professional advisers who can help you through the process as painlessly as possible.

It may be way too late at this stage for most financial solutions to be of any practical use. But if you haven’t already looked at other options, first seek advice about alternative ways to rescue your financial situation from disaster. It is sometimes possible to manage bankruptcy via:

  • An IVA (Individual Voluntary Arrangement)
  • debt management planning
  • Refinancing or remortgaging.
  • consolidating two or more mortgages
  • Restructuring or consolidating your finances

The basic criteria for bankruptcy:

You have a very low or negative disposable income and simply cannot make the repayments you owe on your debts. Your creditors can file against you for bankruptcy if you owe them more than £750. To declare yourself bankrupt, you need to fill in a Bankruptcy Petition. Once this is filed, the court will set a date for your initial hearing, which will decide whether or not to make a formal Bankruptcy Order. If the Bankruptcy Order is made, you are declared bankrupt.

The cost of going bankrupt:

If you decide to go bankrupt, you’ll probably have to pay:

  • £335 Official Receiver’s deposit.
  • £150 court fee
  • £7 charge to swear the Statement of Affairs

Do I have any other options?

Your best bet for a last chance reprieve is via an IVA (Individual Voluntary Arrangements), which involves detailed debt management planning. Get all the information you think you could possible need ready up front to save time and hassle.

What happens if I go bankrupt?

A few key restrictions are held against you until your bankruptcy is discharged, none of which are good news:

  • The bankruptcy trustee controls everything you own (your assets)  including your home.
  • You can only do business using the name you were made bankrupt under in case you get into trouble again. And you cannot create or manage or publicise a company without the court’s permission
  • Under some circumstances your employment can be affected.

While you can open new bank and building society accounts, you are legally obliged to tell them that you are a bankrupt.

What will happen if I need to go bankrupt?

When you go bankrupt you are asked to provide detailed information about your financial situation. You hand over control assets, bank statements and insurance policies to the official receiver and you will probably have to go to court to explain how you’ve got yourself into so much in debt. All of which can be humiliating.

Because you are no longer in control, you are not allowed to make direct payments to creditors during the process. And you are prevented from using your credit cards, and your bank and building society accounts are frozen.

The disadvantages of bankruptcy:

If you’re in a desperate financial position, bankruptcy can begin to seem attractive. But there are plenty of disadvantages.

  • It will cost you money to go bankrupt.
  • You might have to sell valuable personal possessions like cars and jewellery to help pay people off.
  • If you are a homeowner you will probably be forced to sell your home to help pay off creditors.
  • Your business will probably be closed down and your employees let go.
  • You cannot keep bankruptcy private. Bankrupt people are listed online and cases are often covered in the local paper.
  • Even when your bankruptcy is discharged, debts like student loans and court fines can’t be written off… ever!

Life after bankruptcy:

After you are discharged from your bankruptcy, the restrictions and conditions disappear. But your bankruptcy will still be registered with credit reference agencies for up to six years. And even after the six years is up, when you apply for a mortgage you might still have to declare that you were once declared bankrupt.

And you can still have a Bankruptcy Restrictions Order lodged against you if you took on your debts in the full knowledge you’d never pay them back. This can last for up to fifteen years, severely restricting what you can do with your finances.

If you have experienced bankruptcy or know of someone who has become bankrupt we would like to hear about the cycological affects. Please do mention names in your comments.

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