Find Out If You Qualify For Bankruptcy

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If you are struggling to pay back your debts and are considering bankruptcy, you will probably have many questions about it in mind. Bankruptcy works differently in the United Kingdom depending on where you live.  If you are living in Scotland, you should consider sequestration (Scottish Bankruptcy).

 If you live in England or Wales, you should consider bankruptcy. When you are declared bankrupt, all of your debts will be written off.  Going bankrupt is a significant step and one that does involve fees. Bankruptcy will also have an impact on your life, including your work, home and most assets. We have answered some of the most commonly asked questions about bankruptcy.

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What Is Bankruptcy?

Bankruptcy is a form of insolvency which is ideal for those who cannot repay their debtors within a reasonable time. In bankruptcy, your assets such as your car or house can be sold to pay back your debts. That means if the total value of your assets is more than your what you owe then bankruptcy may not be the best debt solution for you.

Once you are declared bankrupt, you will no longer have to deal with your creditors. They also wont be able to take any further legal actions against you. Also, any interest or charges on the existing debts will be frozen. The responsibility of your money and assets will be taken over by a trustee (the person administering your bankruptcy). The trustee can either be an officer appointed by the bankruptcy court or an insolvency practitioner.

In most cases, a bankruptcy order will last for just 12 months, after which all your existing unsecured debts are written off giving you the opportunity to start over financially. There will be financial restrictions during this time.

When the bankruptcy term is over, you will be discharged from it. Note that if you are declared bankrupt, you may not be able to obtain further credit as the bankruptcy will remain on your credit file for six years.

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How Do I Go About Declaring Bankruptcy?

If you are thinking of declaring bankruptcy, you need to complete two forms: a bankruptcy petition and statement of affairs. These two forms are both available online. A bankruptcy petition is a declaration of your desire to be declared bankrupt, we can assist you in completing these forms, simply call us on  0330 133 1228.

What is involved is completing and submitting a  bankruptcy application form online. There is no paper equivalent and you don’t have to go to court to do this. The application serves as an official request to the adjudicator (a government official in charge of approving bankruptcy applications) to declare you bankrupt.

The adjudicator will go through your application and will notify you within 28 days on whether you are eligible for bankruptcy.  The adjudicator may:

  1. Accept your application and make a Bankruptcy Order
  2. Ask for more information. This may extend the time for making a decision by two weeks.
  3. Reject the application. You will have two weeks to request a review of the decision, but you are not allowed to submit any new information. If the review results are rejected, you are allowed to appeal to the court within 28 days.

After the adjudicator makes the order, he will send a copy to you and the Official Receiver (OR) who will act as your trustee in bankruptcy. The Official Receiver is a civil servant in the Department for the Economy (DfE), and is an officer of the court. It is the duty of your OR to review and manage your financial affairs during the bankruptcy term.

They will report all these details to the Court and your creditors. They are also required to report any dishonest or criminal behaviour.

You are required to comply with any requests made by your trustee, which may include:

  1. Providing details of your assets and/ or any increases in your income
  2. Handing over your assets along with your books, records and bank statements
  3. Completing questionnaires.
  4. Attending interviews.
How Much Does Bankruptcy Cost?

The cost of going bankrupt online is £680. This is made up of the:

  • new £130 adjudicator fee (replacing the current £180 court fee)
  • £550 deposit fee, which caters for the cost of administering your bankruptcy.

It used to be the case you had to pay this in full but now you can pay in instalments of as little as £5.

The fee can be paid online by a debit, credit or prepaid card or by cash at any Natwest branch. Note that if you are married, you will each be required to pay these fees separately.

Bankruptcy ADvice

We offer debt solutions to UK residents who are looking to take back control off their finances, we firstly assist you by finding out more about your current situation before recommending to you the most appropriate debt solution for your circumstances.

You must reside in the UK for us to assist you.

Benefits Of Bankcruptcy

Reduce Your Monthly Payments
Consolidate your payments into one.
Legally Binding Agreement
Dedicated Account Manager
Stop Creditor contact
Freeze Interest Rates & Charges
How do I Qualify for Bankruptcy?

If you have unmanageable debts that you believe you cannot pay off within a reasonable timeframe, you can consider bankruptcy. Bankruptcy allows you to pay back your debts in just one year.

Your creditors can petition for your bankruptcy if you owe them at least £5,000.  This means they could force you to go bankrupt. However, if you choose to apply for bankruptcy yourself, there is no minimum debt level. You just have to prove that you cannot manage to repay your debts in a reasonable amount of time.

In addition, you need to have resided in Wales or England for at least six months in the past three years. If you live in Northern Ireland or Scotland, you have to go through your country’s respective bankruptcy process.

Will My Bankruptcy Include all Debts?

Though you can include all your unsecured debts in your bankruptcy, there are some debts you will still have to pay.  These include:

  1. Student loans
  2. Court penalties, fines, forfeiture orders or compensation
  3. Obligation to pay on-going child maintenance arrears
  4. Personal injury claims made against you
  5. Liabilities due to fraud: This includes benefit overpayments

In addition, you cannot include secured debts, such as car finance loans and mortgages in your bankruptcy. This is because your lender would take back the property the debt was secured against. This means you could risk losing your car or home.  Therefore, it makes no sense to include these kinds of debts in your bankruptcy.

What Happens to My Creditors During Bankruptcy?

Once you are declared bankrupt, the Official Receiver will notify your creditors about this. This means they will not have to contact you, your Official Receiver will deal with them initially, and afterwards, your Trustee or Insolvency practitioner will deal with them on your behalf.

Your creditors will be required to provide details of the debts you owe so that they can be allowed to make a claim. After the bankruptcy period is over, all your unsecured debts will be written off.

Although you will not technically owe anything towards these debts anymore, you may still choose to pay something to your creditors.  If you can afford to pay something after deducting your essential bills and other expenses, you can have an Income Payments Order (IPO) or Income Payment Agreement (IPA) for a maximum of three years.

How Long Does Bankruptcy Last?

If you obey all your bankruptcy terms, you may be discharged 12 months after you were first declared bankrupt. You may be required to continue making some monthly payments to your creditors for up to three years.  Whether or not you will have to make these payments will depend on your individual situation. However, your discharge may be delayed if your trustee thinks you never cooperated or acted irresponsibly with your finances during this period.

How Does Bankruptcy Affect My Credit Rating?

Bankruptcy will have serious negative effects on your credit rating for the next six years from the date you first start it. Unfortunately, this is unavoidable.  If you apply for credit while bankruptcy is still on your credit history, lenders will likely reject you. Or if they accept you, they might offer you very high rates of borrowing.  After the expiry of the six-year period, your record of bankruptcy will be automatically taken off your credit file.

It is also essential to note that some lenders will inquire if you have ever been declared bankrupt before you apply for credit. As a result, bankruptcy could have a serious impact on your ability to obtain credit for a substantial period of time.

What is Better Bankruptcy or IVA?

If you are trying to choose between bankruptcy and Individual Voluntary Arrangement (IVA), here is all you need to know about these two debt solutions. We will compare these two debt solutions based on how they affect your monthly payments, home equity, car and credit rating.

Monthly Payments

You have to make continuous monthly payments towards your debts whether you choose an IVA or bankruptcy. However, chances are that you will likely pay lessoverall if you choose bankruptcy.

With an IVA, you will be required to maintain reasonable payments towards your debts for 5 to 6 years. With bankruptcy, on the other hand, you will be required to make these payments for only 3 years, meaning you will save yourself two years of payments.

Home Equity

If you are a homeowner, the decision whether to choose IVA or bankruptcy will largely depend on the amount of equity in your property. If you have a considerable amount of equity in your home, you should avoid bankruptcy as it puts your home at risk. An IVA, on the other hand, will allow you to keep your home but you may have to release some equity from it.

However, if your home has little or no equity, chances are that you will be allowed to keep it if you are declared bankrupt. In such a case, bankruptcy is worth considering.

Effect on Your Car

In bankruptcy, you will be allowed to keep your car if you need it. However, its value should not be more than £1000. If your car is more than that, you will be allowed to sell and get something cheaper.

In an IVA, you are allowed to keep an expensive car. There is no problem of owning a vehicle with a value of more than £1000. Thus, if you want to retain your expensive car, consider choosing an IVA. If your vehicle is on hire purchase or a lease, you will be required to continue paying for it during an IVA term.

Effect on Your Credit Rating

In both bankruptcy and IVA, your details will be entered on to the Insolvency Register. These records will appear in your credit file for 6 years. This will make it difficult for you to obtain further credit during this time. 

Effect on Your Work

There are some jobs you may not be legally allowed to hold when you are bankruptcy or in an IVA, including being a company director and some qualified professionals. Both bankruptcy and IVA are matters of public records, which mean your employer can find out.

Note that in some workplaces, it is a condition of employment that you cannot become insolvent. This means that both IVA and bankruptcy can affect your ability to keep your job.

What are the Pros and Cons of Bankruptcy?

Pros of Bankruptcy

  1. You can make a fresh start once your bankruptcy is discharged.
  2. The money you owe is usually written off after the bankruptcy term is over.
  3. You will still have enough funds to live on and you will be allowed to keep certain assets.
  4. Your creditors will be barred from taking legal action against you or contacting you.

Cons of Bankruptcy

  1. You need to pay about £700 to go bankrupt, not including solicitors’ fees.
  2. It becomes public knowledge your bankrupt by doing a  search for your name in the Insolvency Register.
  3. Your bank accounts and credit cards will be closed and you may have difficulty opening new ones.
  4. You may have to sell your home and other valuable assets that you own.
  5. Bankruptcy may affect your immigration status.
  6. Bankruptcy does not cover all debts. You will be required to continue paying debts, such as court fines and student loans.
  7. You will find it difficult to obtain further credit for the next six years.

These are just some of the most important details to know about bankruptcy. Before deciding to declare bankrupt, consider other debts solutions. such as a debt management plan or IVA its highly recommendable you consult one of our experienced debt advisor to help you determine what your options are depending on your financial situation. If you are looking for a trusted and experienced debt expert, Contact Us.

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Your Debt Advisor understand the difficulties involved in being in debt, we understand how quickly things can unexpectedly change. Your Debt Advisor are here to provide you with free & impartial advice. You can use our free eligibility checker to find the best solution for you.

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