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Bankruptcy Advice

Bankruptcy is an option to resolve debt problems where other solutions may not be as suitable. Before considering whether bankruptcy is the best option, the individual must first consider what assets they have, such as a car or house, and whether the value of their assets are more than the debt that they owe, as this could have an impact on an application for bankruptcy, or the Insolvency Service may request that the individual relinquishes their assets to help pay their creditors.

In many instances, there may be better alternatives to bankruptcy, however, we will be unable to determine what the best solution is without completing a financial assessment with the individual concerned.

There is a cost to become bankrupt. Typically, there is a Bankruptcy deposit of £550 payable to the Insolvency Service, and an application fee of £130; these fees can be paid in instalments, however an application will not be formally made until all fees have been paid. The instalments must be a minimum of £5 per month.

To be eligible for bankruptcy you must owe more than £750, and you must be able to pay the fee prior to completing the application. Debts that cannot be incorporated into a bankruptcy order include Student Loans, and any secured debts such as a mortgage or secured loan that are not included in the petition. Payments to these types of debts must be maintained as they are outside of the bankruptcy application.

Some of the benefits of bankruptcy include:

  • Not having to deal with your creditors once the application has been approved.
  • Having all of the appropriate debts included in the order.
  • Once the bankruptcy has been discharged (usually after one year), all unsecured debts will be written off and can never be recalled.

There are also some considerations to make when applying for bankruptcy:

  • If the debtor has available disposable income, they will be expected to contribute this each month into the Bankruptcy; this may be up to 3 years under an Income Payment Arrangement.
  • Their credit rating will be severely affected for at least six years, and they will be placed on a public register of Insolvencies for 12 months following the Bankruptcy Order.
  • Bankruptcy must be disclosed to any new employers, where applicable, for six years.
  • There are limitations restricting individuals who are bankrupt from holding the position of company director until they have been discharged.
  • They are unable to obtain credit over £500 without telling the creditor that they are bankrupt.
  • They risk their assets being seized.
  • Any windfalls must be declared and are likely to be included within the bankruptcy.
  • Should the Official Receiver feel that the conduct prior to the Bankruptcy has been dishonest or fraudulent then they could receive a Bankruptcy Restriction Order for anything from 2 years up to 15 years, depending on the offence.

It is vitally important that you seek advice before committing to a solution such as bankruptcy. If you would like to talk to someone who can explain the implications of bankruptcy, or offer you some alternatives, please call us on 0808 22 22 123. Alternatively you can complete our assessment form.

We offer impartial advice and will make you aware of all applicable financial solutions based on your individual financial circumstances. We will also make you fully aware of the potential costs, implications, advantages and disadvantages involved in any proposed financial solution.