While bankruptcy can be the answer for people with serious debt problems, it is the most extreme solution for dealing with debts, going bankrupt should only be considered as a last resort.
What is bankruptcy?
A court procedure where a trustee is appointed to realise your assets. Once a bankruptcy order is made against you your financial affairs will be controlled by the Official Receiver/Trustee, your financial situation is made public and your employment may be at risk if you work in some professions.
How does it work?
All your assets (except personal effects and pensions) will be realised to pay back your creditors. Bankruptcy normally lasts for 12 months (but can be extended by between 2 and 15 years in certain circumstances). You may have to pay the trustee some of your income for up to 3 years. The equity in your house (unless it is very small) will need to be paid to the trustee, who could seek repossession and sale of your home.
What else should I know?
Bankruptcies are advertised in the local press, so your situation will be made public. Your credit rating will be affected before and after the bankruptcy, making it harder for you to raise new borrowings. You will automatically be disqualified from being a company director while you are bankrupt.
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