Bankruptcy can be the best option for dealing with debts and can allow the debtor to make a genuine fresh start with their lives. It is a perfectly legitimate way of dealing with debts and no longer seems to have the stigma attached it once was perceived to have with many people now taking this option.
How are you made bankrupt?
- voluntary - the debtor petitions themselves online
- involuntary - by a creditor owed £5,000 or more
- the supervisor or anyone bound by an Individual Voluntary Arrangement (IVA)
How much does bankruptcy cost?
- £550 - official receivers fees (no exemptions, everybody has to pay these)
- £130 - adjudicator fee
- genuine fresh start with debts legally written off
- allowed a reasonable amount of money to live on
- no longer have the stress and worry of dealing with creditors and their agents
- usually allowed to keep all essential household goods
- in some cases allowed to keep vehicles (cars) if they are needed or employment or health / disability reasons (eg DLA mobility scheme)
- some cases able to keep the home (eg negative equity & small equity / third party equity purchase)
- discharged after one year or earlier. An early discharge will only be considered if your bankruptcy order was made on or before 30 September 2013. Early discharge will no longer be considered for bankruptcy orders made after that date following changes to the law
- home & any valuable assets could be at serious risk of being sold to raise equity or monies
- risk to employment in certain professions (check contract of employment)
- some tenancy agreements may include an insolvency clause (risk to home)
- bankruptcy details are entered on the Insolvency Service Public Register and the London Gazette. In some cases bankruptcies can still be advertised for one week/day (usually in a small print section) in local newspapers.
- if the bankrupt person owns a business / ltd company it could be closed down / employees dismissed / assets sold off
- may be subject to an income payment arrangement (IPA) or order(IPO) lasting 3 years
- may be subject to a restriction undertaking(BRU) or order (BRO)
- certain debts cannot be included - fines / CSA / criminal injury / student loans
- unable to obtain credit of more than £500 / credit rating affected for 6 years
Please note there are advantages, disadvantages and possible serious implications with bankruptcy and other dealing with debts options mentioned in this guide. We would always strongly advise that you seek full in depth advice from the CAB or an alternative agency before making any decisions.
Also, see our Basic Bankruptcy Guide for further information.