Bankruptcy
Description
Bankruptcy should be considered as a last resort, when you have exhausted all other options or have no disposable income to pay your creditors. Whilst you are bankrupt any assets that you have would be used to pay off your debts. After a period of time all of your outstanding debts are written off and you can make a fresh start.
Eligibility
A creditor can make you bankrupt if you owe £750 or more to that creditor and you have not been able to agree how to repay the debt. You can also be made bankrupt if your Trust Deed or Individual Voluntary Arrangement (IVA) fails.
Advantages
- If you are not in employment and in receipt of benefits, the Insolvency Practitioner cannot seek payment of any contribution
- On completion of the Bankruptcy period, all debts are written off and creditors are unable to pursue you for any debts owed before the bankruptcy period started
Disadvantages
- You lose control of all your assets, including your home and these may be sold to pay your creditors
- Bankruptcy restricts your ability to obtain credit in the future without permission from the lender and your credit rating can be affected for many years
- The Insolvency Practitioner appointed acts solely for the benefit of your creditors
- You cannot act as a company director or take part in the management of a limited company (without the permission of the court) and may not practice as a chartered accountant or a lawyer
- There may be a clause in any Hire Purchase agreements which terminates the agreement and this can result in the repossession of the goods
- If you are in full time employment, the Insolvency Practitioner appointed will seek payment of a contribution from your earnings