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Bankruptcy Debt Solution

Summary: Bankruptcy is a form of insolvency for people who unable to repay their debts. You will lose control of your assets but you will no longer be responsible for your debts, although you may need to pay back what you can afford through an Income Payment Order (IPO) for 3 years.

What is bankruptcy?

Bankruptcy is a court order that you can apply for if you are in debt. Someone you owe money to can also apply to make you bankrupt even if you don't want this. Once you have been made bankrupt, you don't have to deal with the people you owe money to (your creditors). An official called the Official Receiver takes control of your money and property, and deals with your creditors. When the bankruptcy order is over, you can make a fresh start and the money you owe is usually written off. In many cases, this can be after only one year. Creditors have to stop most types of court action to get their money back following a bankruptcy order. However, there are advantages and disadvantages to going bankrupt and bankruptcy might not be your only option and it might not be the best one for you.

You may also be eligible for a Debt Relief Order which is for people with lower debt and no assets, who cannot meet the fees involved with bankruptcy.

For further information you can visit www.bankruptcyhelp.org.uk.

Advantages

  • pressure is taken off you because you don't have to deal with your creditors
  • you are allowed to keep certain things, like household goods and a reasonable amount to live on
  • when the bankruptcy order is over, you can make a fresh start. In many cases, this can be after only one year
  • creditors have to stop most types of court action to get their money back following a bankruptcy order (but in some cases the bailiffs may still be able to take your belongings away)
  • any money you owe can usually be written off.

Disadvantages

  • it will cost you over £700 to go bankrupt. It can be more if, for example you use a solicitor
  • whilst you are bankrupt, you can't apply for more credit
  • if you own your own home, it might have to be sold. However, you may be able to apply to your local authority for re-housing
  • some of your possessions might have to be sold. For example, you will usually lose your car (over £2000 in value) and any luxury items you own
  • some professions don't let people who have been made bankrupt carry on working
  • you cannot act as a Director of a limited company
  • there can be publicity and your name will appear on an insolvency register
  • even when you are no longer bankrupt, there are some debts such as court fines and student loans that will never be written off.

The above is provided as information only. Iva.co.uk does not provide debt advice. You must always seek professional advice before taking any action to resolve your debts.