Is bankruptcy the right thing for me?

Bankruptcy is the final solution for any individual who has debts which they are no longer able to pay off.

In theory and, if done correctly, bankruptcy does promise light at the end of the tunnel and a life free from debt. In order for bankruptcy to work many considerations need to be made. Let’s look at these in a bit more detail.

Bankruptcy does not protect you from all debt

Although most debts are eligible for bankruptcy, there are some exemptions. The following debts cannot be admissible in bankruptcy and so will survive even after you have been discharged from bankruptcy.

• Debts to a Court
• Family related debt, certain claims from divorce proceedings
• Debts to the Student Loans Company
• Debts that are secured against an asset i.e. a mortgage which is a loan secured against your property
• Debts owed to because of personal injury or death caused to someone else

If you are unsure of how to deal with your financial circumstances please call me for free on 0330 236 9930, 0330 236 9938 or 07961 116321 and I’ll be more than happy to take you through the possible options to safely help you navigate the debt.

Assessing whether bankruptcy is the right thing for you

Even if you do have debts that can qualify for bankruptcy, that does not always mean it’s the right thing to do. Here are examples of such scenarios:

• You know that your poor financial situation is temporary, and you see it improving in the near future. For example, you’re going to start a new job soon, get a pay rise, receive an inheritance etc.
• You have savings that could be used to pay the debt. These could be cash savings or assets such as a rental property, jewellery, a vintage antique collection and so on.
• You are close to retirement and will have access to a pension very soon.
• You know that altering your spending habits, within reason, could help you pay off debts.
• If you have equity in your property which can be released to pay off some of the debts

It is very important to note that if you have disposal income or savings because the Official Receiver (Court appointed – to deal with your bankruptcy ) will assess your financial situation to see if you have any funds/ assets that can be used to pay your debts off, so either way these sources of income will be taken away from you and used to pay the debt. It’s better for you to use these to pay off debts on your own terms. Do not hide these because it’s a criminal offence and you will be liable for prosecution.

Other ramifications of being bankrupt

Bankruptcy will change your life, and you need to be prepared for that. Once you are bankrupt, you can:

• No longer be Director of Limited Company
• Cannot work in finance, the gambling industry or any industry that is regulated by a professional body
• Your bank account will be frozen and you will need to find an alternative way to manage your money (there are only a certain number of banks who will allow you to have an account after your bankruptcy)
• Your bankruptcy will be made public knowledge
• Your credit score will be negatively affected, making it harder for you to borrow money in the future (bankruptcy will stay on your credit file for six years)

When is bankruptcy the right option?

In typical circumstances, bankruptcy is the right option only if you have no other way to pay off debt. That means you have no savings, pension, assets or any other resource of monetary value available to you to fall back on.

In simple terms, bankruptcy is the right option when it’s the only genuine option that remains.

How do I become bankrupt?

The process of become bankrupt is very simple. You will need to complete a bankruptcy application and pay a fee of £680. Before you make this application, make sure you have properly assessed your options. If you are unsure, please call me for free on 0330 236 9930, 0330 236 9938 or 07961 116321 and, after understanding your situation, I can advise on the best course of action.

If you’ve already made an application to become bankrupt and are waiting for the results, you need to withdraw your essential living costs from your bank account. This is because as soon as the bankruptcy application is successful, your account will be frozen.

If your application for bankruptcy is made under the right conditions and is successful, you will be free of any unpaid debt once you are discharged from bankruptcy (subject to those mentioned above which are not covered in the bankruptcy). This is after a year.

Next steps

This blog is for educational purpose to give you an understanding of when bankruptcy may or may not be the right thing for you. Please do not take the information in this blog as advice.

If you want to find out more, please call me on 0330 236 9930, 0330 236 9938 or 07961 116321. The first conversation is free of charge and all conversations are in strict confidence. You can also email me on vee@navigatebr.com