Should You Enter Bankruptcy?

Bankruptcy can be a daunting and confusing process. The ‘B word’ strikes fear into the hearts of many. However, in the right situation and if handled correctly, can actually be a good option to start fresh.

Having said this, bankruptcy and insolvency are not to be taken lightly. These processes have serious financial implications and put your assets at risk. This is why they need to be handled correctly by experts to ensure the best outcome for those involved.

If you are Worried About Bankruptcy

If you are thinking about bankruptcy, you are probably in one of two scenarios:

You have missed payments on a debt. As a result, you have received a Statutory Demand or County Court Judgment from a creditor.

If this is the case, you do not have long before bankruptcy proceedings against you begin. You have 21 days from receiving a Statutory Demand to the beginning of your bankruptcy. If you have just received a statutory demand, click here to get more information on what you need to do next.

There are still ways to avoid bankruptcy, or, depending on your situation, make the best of a bad situation. However, all of these outcomes require immediate action as with bankruptcy, the sooner you act, the better the outcome.

You have too many debts and no way to pay them so want to declare yourself bankrupt to remove these debts.

If this is the case, bankruptcy can be a great way to ‘start fresh’ and wipe these debts. However, as mentioned above, there are serious financial implications from bankruptcy. You need to be sure that you have prepared correctly before proceeding down this route. This includes looking at your assets, income and other factors.

This is the part of bankruptcy that is most confusing and often causes the most problems, there are a lot of do’s and don’ts when it comes to bankruptcy, so it’s vital you are fully informed before making any decisions. This is why we always recommend consulting experienced debt experts before beginning any bankruptcy proceedings.

What Happens After Bankruptcy?

After you are declared bankrupt, a Trustee will be appointed to oversee your bankruptcy, repossess your assets and sell them to pay back creditors.

Usually, you will be bankrupt for 12 months. During this period, you cannot take out any new loans, you cannot be a director of a company, and you may face some restrictions on travel. After 12 months, if you have been fully compliant, you will be discharged and are no longer deemed bankrupt.

For 3 years after this, the Trustee can still repossess assets and, your credit file will be impacted for up to 6 years.

What About Other Assets?

The trustee can recover any assets of value. This includes things like investments, cars, jewellery or even your pension in some cases.

If the bankrupt has significant earnings during bankruptcy, there may be an Income Payment Order that will apply. An IPO simply means that if there is surplus money available at the end of every month after all utility bills are paid, then the Official Receiver/Trustee may take a percentage of this for the benefit of the Creditors.

Other Impacts of Bankruptcy

As well as an immediate risk to assets, bankruptcy has several other impacts. These include:

• You cannot be the director of a company for the time you are bankrupt.
• Bank accounts will be frozen.
• Your credit score will be impacted for 6 years.
• Depending on your job, your employment may be impacted.