Bankruptcy is a legally binding debt solution that’s often used as a last resort on the basis that you cannot repay your debts.
If you have unmanageable debt, bankruptcy may be a viable option to help you secure a debt-free future.
What is bankruptcy?
Bankruptcy is a form of insolvency that writes off debts if you can't afford to repay them. It is a legal process that's suitable only if you are unable to settle your debts.
Bankruptcy allows you to write off all unsecured debt, this enables a fresh, debt-free start. In some cases, creditors can petition to make you bankrupt. In order for this to happen, you must owe a minimum of £5,000.
If you can't afford to pay any of your debts, this may mean that you are insolvent and need to file for bankruptcy. You should seek advice immediately from an insolvency practitioner before entering into the process.
Benefits of bankruptcy
- Unsecured debts are written off.
- Once your bankruptcy is completed you will be able to start again financially without any debt.
- No further legal action to recover money can be taken against you by creditors.
- Creditors can no longer demand payment, charge interest or any other additional charges.
Risks of bankruptcy
- Personal assets such as your home or vehicle may be included in your bankruptcy.
- Some jobs, such as in the legal or financial sector, may be affected.
- Bankruptcy will negatively impact your credit score and will continue to do so for six years.
- Your bankruptcy will be recorded on a public register
What is the process of bankruptcy?
Bankruptcy is a court procedure.
You can make an application to the court yourself under a debtor's petition or an application could be made by one of your creditors' under a creditor's petition. Once an order is made the Official receiver will be appointed to deal with the administration of your case.
There may be an insolvency practitioner enlisted.
Depending upon the complexity and value of your case the Official Receiver may appoint an Insolvency Practitioner to deal with the case as Trustee in Bankruptcy. You will not have any say in the appointment of the Insolvency Practitioner, and in practice, he could be situated anywhere in England or Wales.
Your assets will be realised.
The Official Receiver's (or the Trustee's) role is to realise your bankruptcy assets (if any), agree creditor claims, distribute any dividends and investigate any matters arising that he considers appropriate. All calls from creditors' can be referred to the Official Receiver or Trustee.
One year discharge.
You will be automatically discharged after one year from the date of the Bankruptcy order or earlier if the Official Receiver has completed all his enquiries. The Official Receiver or Trustee can apply to have the automatic discharge suspended if his enquiries are ongoing.
All debts will be written off.
Any debts not paid from the recoveries made by the Official Receiver or Trustee will be written off. There is no restriction on the value of your assets or the level of your creditor or your income (as with a DRO).
Griffin & King bankruptcy guidance
If you’re thinking about going bankrupt, there are many factors to consider. You will need to clearly understand the consequences and how it could affect you and those around you. Speak to a member of the Griffin & King team today to help understand if it’s the right solution for you.
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