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Eradication of unmanageable debts, albeit with significant future consequences

In a nutshell, Bankruptcy should be considered as a final debt solution once all other avenues are exhausted. While declaring bankruptcy writes off your debts, there are serious implications that will affect you for a minimum of six years, so consider bankruptcy debt help services from a reputable debt agency in the first instance.

Bankruptcy isn’t available in Scotland, where the equivalent debt solution is known as sequestration, which has differing associated fees and legal processes.

How declaring bankruptcy helps?

Bankruptcy may be the best debt help for those who meet the following strict criteria:

  • At least £5,000 is owed
  • You’re unable to repay your debts over a reasonable amount of time

Our debt expert’s opinion on the pros and cons declaring bankruptcy…

Advantages of Declaring Bankruptcy

  • Bankruptcy will write off most unsecured debts, removing the pressure of the never-ending cycle of debt.
  • Creditors will be legally required to cease all court action.

Disadvantages of Declaring Bankruptcy

  • Bankruptcy debt settlement can’t eliminate all debts, including student loans, secured debts, child support, ex-spouse legal fees and credit card debt, legal compensation, and income tax liability.
  • Your name and details will be published in the Individual Insolvency Register.
  • Depending upon your job contract, bankruptcy debt could affect your job.
  • If you have assets (including property, a vehicle or items of high value) you should expect them to be sold at auction.
  • After declaring bankruptcy your credit rating will be impacted for up to six years, during which time you’ll find it difficult, if not impossible, to get credit.
  • Finally, bankruptcy debt settlement may also affect your business and personal pension.

Worried about debts that won't go away?

FAQs – Personal Bankruptcy

  • How long does bankruptcy last?

Bankruptcy generally runs for 12 months, after which time it is discharged. However, if you have surplus income at the end of this time, you may be expected to continue to repay your debts up to a period of 36 months in total.

  • How will bankruptcy debt impact my credit rating?

Bankruptcy will be recorded on your credit file and will remain there for six years. You will find it harder to get credit after bankruptcy and will need to slowly rebuild your history.
If you apply for credit of £500 or more during your bankruptcy, or up to six months after discharge, you are legally obliged to inform the relevant lender of your position.

  • Should I seek legal advice before Declaring Bankruptcy?

Yes, absolutely – bankruptcy is a serious debt solution that has future consequences. It’s important to seek legal advice, as well as the input of a debt agency with a good reputation before Declaring Bankruptcy.

  • Will I lose all of my possessions during bankruptcy?

Some assets are automatically transferred to the possession of the ‘Trustee of Bankruptcy’, including (but not limited to):
• interests in property (even jointly held property)
• building society or bank account balances
• lump pension or investment sums
• bonds, shares, savings policies, and endowments
• individual possessions of considerable value, such as your car or jewellery (although you may be allowed to replace these with lower-cost versions)

Additionally, you may also need to pay a set amount from your weekly or monthly wages, depending on if and how much surplus income you have.

  • Will everyone know that I’ve been declared bankrupt?

All bankruptcies are listed on a public bankruptcy register, which can be accessed via the internet. All of your creditors will be informed of your bankrupt status.

  • Could I lose my job if I go bankrupt?

There are certain jobs that may be impacted after declaring bankruptcy. To check, read your contract of employment or speak with a relevant body for your profession.

  • Could bankruptcy write off my student loan?

Only if your student loan was taken out before 1st September 2004 (and even then, it’s not for certain whether it will be included). Ask your legal representative for advice.

How to Cut the Cost of University through Grants, Bursaries and Scholarships

Before moving forwards with declaring bankruptcy, you may want to research the following alternative debt solutions:
• An informal repayment arrangement with your creditors – An agreement between yourself and your creditors for repayment
• An Individual Voluntary Arrangement – A formal, legal contract for debt repayment
• A Debt Management Plan – A repayment plan involving reduced monthly repayments

  • What is an Income Payment Order (IPO)?

An IPO is a legal court order. If you don’t keep up with the required payments, your trustee could request a court order that suspends the bankruptcy discharge, or they may request that money is removed directly from your wages/salary/income. A final option left open is alternative legal action to recover any unpaid debts.

  • Will my bankruptcy be printed in the newspaper?

Publishing bankruptcy names hasn’t been common practice since 2009, although there are exceptional circumstances that could lead to newspaper publication (which is why you read about celebrities being declared bankrupt in the media).

*An Individual Voluntary Arrangement (‘IVA’) is subject to the customer meeting qualifying criteria and gaining creditor acceptance. Monthly IVA payments include fees and may differ to the example provided, based on the assessment made of your own personal circumstances – these fees will be clearly explained to you in writing by your IVA company. Debt write off amounts are subject to creditor acceptance and vary by individual customer based on their own financial circumstances, and are applied upon successful IVA completion.

Substantiation example, Someone owes £60,000, they pay £100 over 60 months which equals £6000, write off amount would be £54,000 which is 90% of total debt level. Upon submitting your details on this website we will pass your details to one of our approved partners as this website does not give any advice.

Free debt counseling, debt adjusting and credit information services are available from the Money Advice Service.

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