What Bankruptcy means to you

As negative a perception over this process there might be, still bankruptcy is often considered to be the only way to escape the stress of frequent payment demands from banks, credit card companies, debt collectors, and a host of other creditors or lenders.
However, bankruptcy is not a solution that should be opted for without a great deal of consideration and analysing. There are some situations when it can be the best thing to do, but then again there are other cases when it would most likely be a huge mistake.

Once you will be declared bankrupt, you will be put under a great deal of constraints and restrictions, and it will affect your future life. These said constraints which are put upon you once you are declared bankrupt make bankruptcy a viable option only in the most extreme of cases. More often it is best to first seek proper credit counseling, that will lay out before you all your option, and usually you might find that an IVA – Individual Voluntary Agreement – is a more suitable solution to severe debt problems, due to the fact that it offers similar debt relief to that offered by bankruptcy, minus the associated severe constraints and other additional costs.
Bankruptcy is the option for those that find their current situation as described bellow:
If there is no chance of being able to set up an alternative such as an IVA.
If you are unemployed, posses no assets and no available income.
If you have retired, or you are sure you will have no future need for credit.

You, as debtor who is insolvent, can be the subject of proceedings. But you can also petition your own bankruptcy

In other cases, creditors, either alone or jointly, have the possibility to petition the court for a debtor to be made bankrupt if that debtor owes a minimum of £750.

It is also possible for the supervisor of an IVA to apply for bankruptcy proceedings against a debtor if he can prove that he has defaulted on the arrangement.
If you've been declared bankrupt, your existing assets, including your car and even your home can be sold to repay your creditors. Bankruptcy is a more sensible solution when you posses few assets, and only the property owned by the debtor is directly at risk under bankruptcy, while in the case of jointly-owned property, like the family home, the trustee could sell it to realise the value of the debtor's share.
The afore mentioned trustee also has the power to investigate any undervalued sales or gifts or other earnings made in the previous five years. If it is found that gifts that were made whilst the debtor was insolvent, the trustee is allowed claim the value of the gift, or undervalued part of the goods, from that person who received it.

Another thing to be kept in mind is that, as an undischarged bankrupt, it will be considered an offence not to declare your status if or when you apply for credit larger than £500.
It will prove virtually impossible to obtain credit facilities as an undischarged bankrupt, thus making it difficult to run a business. You will be prohibited from holding any position as Company Director, without prior approval from the court. Other positions which are prohibited for you to hold as undischarged bankrupt are magistrate, councillor, school governor, estate agent or Member of Parliament. It’s also almost impossible for you to practice as an Accountant or Solicitor due to rules surrounding these professions.
If you are self-employed, sole trader you should be aware that the bankruptcy order will be published in the local press, which has the potential to affect both your business and personal reputation.
If you own a home, bankruptcy will cause you problems in that it will put a dam in your possibility to move to another property due to your inability to borrow money. If you are a tenant, you may find it difficult to raise the deposit or the upfront rental payments since you are denied the ability to borrow money.

Psychologically, filing for bankruptcy can be a very stressful experience, especially since there might be public examinations of your financial affairs in the court of law.
In the local newspaper an advertisement will be placed as notification of a person's bankruptcy and also inviting claims from anyone who you might owe money to. Also, these details are a matter of public access, as they can be viewed online on the Insolvency Service public register.
Another psychological effect is due to the fact that there is still a matter of common misconception that debtors are second class citizens.
As financial consideration, bankruptcy is more expensive than an IVA due to the fact that there are large expenses to pay including in court and as insolvency service fees. And on top of these hefty expenses, another charge of 15% will be levied on all sums received by the appointed Official Receiver or trustee, charge that will be paid out of the assets of the bankrupt.

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