Bankruptcy is a formal insolvency procedure for individuals that cannot find an alternate way to clear their debts.
Bankruptcy may be considered where existing debts far outweigh your existing income and assets with little prospect of paying it back within a reasonable timescale. After Bankruptcy your debts will be written off, Bankruptcy will affect your credit rating for 6 years. You may lose control of valuable assets, and be required to make contributions from your income for up to three years.
Advantages of bankruptcy
A fresh start
- In most cases, bankruptcy usually only lasts for 12 months
Deal with your unsecured debt
- Apart from a few exceptions (e.g. court fines and child maintenance) bankruptcy includes all unsecured debts. Debts included will be written off once the bankruptcy is discharged
Relieve pressure
- Eliminates the pressure of dealing with the companies you are in debt to, as creditor contact will stop once the bankruptcy is in place
Considerations of a Bankruptcy
- You could lose assets of value including your home if you are a homeowner.
- Once your Bankruptcy is approved you are bound by formal insolvency proceedings and your credit rating will be affected.
- Your details will be recorded on the insolvency register, which is a public register.
- Your employment could be affected, and you are unable to act as a company director.
