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What Is Bankruptcy And Is It Right For You?
Bankruptcy is an option that exists for someone that is in dire straits with their finances. Many people view it as a “get out of jail free” card when they have severe debt. This couldn’t be farther from the truth. Many people have a misguided view of what bankruptcy is all about. Here are some facts about what it is, how it can help you, and the effects it can have.
Bankruptcy laws are regional. This means that people who live in different countries of the UK will be affected by it differently. Those that live in Scotland should look into Scottish bankruptcy (also referred to as sequestration). Those that live in England, Northern Ireland, or Wales can use the information below for their bankruptcy procedure.
Are Debts Written Off?
When you declare bankruptcy, all of your debts are written off by your creditors. This doesn’t come without any repercussions. There are many other areas where it will affect your life for a long period of time. There are also costs involved with the process. You may even have to give up some assets to complete the process of bankruptcy.
Is it right for you?
While bankruptcy will make your financial situation insolvent, you should only proceed with it if you absolutely have no means of paying off your debts before it’s too late. It should be last resort.
Compare the value of your assets to the total amount of your debt. If the value of the assets is greater than your total debt you should avoid bankruptcy. It is more advisable to sell off your assets to pay off the debt. It will set you back, but it will affect you less in the long term.
If you do declare bankruptcy, you will be in that state for one year. During that 12 month period, you will not be able to take out any loans. There are also some other financial restrictions during the one year period. You are discharged from bankruptcy after one year. One thing that you should know is that filing for bankruptcy stays on your financial record for the next 6 years. This will deter some creditors and other financial institutions from working with you.
What is the process for going bankrupt?
The first thing you need to do is file a bankruptcy application to the correct institution. In England and Wales, it’s the insolvency service. In Scotland it’s the Accountant in Bankruptcy and in Northern Ireland it’s the High Court.
You probably have a lot of further questions about bankruptcy. Here are some answers to common questions about the process.
Can a married couple file joint bankruptcy?
No. The only time a joint bankruptcy can be filed is when it is two business partners. When two people own a company the debts that they have together can be combined during a bankruptcy proceeding. It is important to know that those that file bankruptcy will both be negatively affected by it. Before you enter a credit agreement with someone, you should be sure that they are not a bankruptcy risk.
Is it a voluntary act?
Yes. This is called voluntary bankruptcy. Most people that apply for bankruptcy do so under their own volition.
Can others force me to go into bankruptcy?
It’s the last thing they want to do, but many creditors can for forcing you to go bankrupt. They will only do this if they are absolutely certain that you are not going to pay them back. This is the last resort for creditors. They like to avoid it at all costs because the process is tedious for them.
What kind of debt can be included in a bankruptcy?
Bankruptcy can erase most types of debt that you incur. This includes debt from credit cards, utilities, bank overdrafts, and retail accounts. Applicants should include every debt they have when applying. If you leave some out, they will still be included in the insolvency. It is just ideal to be as forward and honest as possible right off the bat.
There are certain debts that cannot be included in bankruptcy in the UK. The most important thing to know is that your mortgage or any other loan take out against your home cannot be included. Criminal fines and child support fees must be paid outside of a bankruptcy as well as student loans and any debt that is incurred after declaring bankruptcy. Most debts are removed by bankruptcy.
There are some situations where a mortgage could be included in your bankruptcy. If you want to do this you will probably have to give back the keys to your property. You can also include your home if it has already been repossessed by your mortgage company. Basically, if you wish to stay in your home, you cannot include your mortgage in the application.
Many times, two parties will enter into a debt agreement together. If one party declares bankruptcy, the other person will responsible for the payment and the other will have the debt taken off of their record. The debt will be placed completely in the other person’s name.
If you have read all of this and think that bankruptcy might be the best choice for you, you should seek some further advice. Going bankrupt is no small decision.
Contact us if you need further advice regarding bankruptcy. We have the knowledge and experience to know if it is the right decision for you. We will assess our financial situation completely and recommend the right course of action for you. If we don’t think bankruptcy is right for you, we will recommend another protocol to help you with your debt problem.