All you need to know . . .
What is Bankruptcy?
If you’re unable to repay any outstanding debt in England, Wales or Northern Ireland, Bankruptcy is one of a number of wider financial solutions available to you. Bankruptcy is a form of insolvency. Scottish residents have a similar option available to them, known as Sequestration. While there are similarities between both debt solutions, they are not exactly alike.
A legally binding solution to help you write off debt. It is a formal type of insolvency.
Bankruptcy may be suitable for someone who has no option available to repay his/her unsecured debts. You can voluntarily declare yourself bankrupt, or by an aggressive creditor involuntarily that you owe more than £5,000 to.
Bankruptcy is a legal agreement. It is designed to help you write off any unsecured debt that you’re unable to pay. After being discharged, normally after 1-year, qualifying debt will be written off. This will help to give you a new start, although the financial ramifications can last up to 6 years.
The promise of writing off your unsecured debts can sound very appealing to many, this may make you want to apply as soon as possible, however, there are a number of factors that you must take into consideration before deciding. If you’re not eligible or your financial circumstances are due to change in the foreseeable future, you will not be able to proceed with Bankruptcy. Applying for Bankruptcy can be a straightforward process with the right expert advice and guidance. Depending on your current financial situation, it may even be the most suitable option to becoming debt free.
If you’re wondering if Bankruptcy is the right solution for you, speak to a debt management specialist at Refresh Debt Services for FREE advice on 0800 121 48 63 or complete the form on this page to request a call-back.
What are the benefits of Bankruptcy?
Once the bankruptcy order is in place, you won’t have to make repayments to most types of debts that were included within the application. Most of your creditors (people and companies that you owe money to) won’t be able to force you to make payments to your debts. Generally, after 1 year, you will be discharged and any qualifying debt will be written off. However, it is very important to remember that you are still liable to pay any debts that aren’t eligible for inclusion, as well as any debts that were accrued after submitting your application.
What are the drawbacks of Bankruptcy?
Although your debts will be written off after being discharged, this is usually after 1 year. The effects of Bankruptcy will last for an additional 5 years. Your credit file will also be affected because you will be declared insolvent through the insolvency register. This will affect your credit rating for the time period mentioned above, subsequently reducing your chances of being granted credit. You will have to pay a large fee when applying, here are some other disadvantages to bankruptcy:
• Depending on your income level, you may be required to make payments towards any debt for 3 years.
• If you’re a home owner, you may have to sell your property as part of the process.
• Some possessions such as your car or jewellery may also have to be sold.
• Depending on your age, if you’re receiving a pension or you will be in the near future, this may also be taken.
• Depending on your profession, you may not be allowed to continue to work in some roles.
Bankruptcy is a formal type of insolvency. Not all creditors can be included. If your income increases or you trigger a ‘windfall clause’, the terms of your Bankruptcy could be affected.
If you would like to discuss the advantages and disadvantages of Bankruptcy with a Refresh debt advisor, call 0800 121 48 63 or request a call-back by completing the contact form on this page.
How to apply for Bankruptcy
If you have decided that Bankruptcy is the right option for you, we will put you in contact with a professional insolvency practitioner, should you need additional help or advice with the process, we’ll be right here to help.
Your insolvency practitioner will confirm that you’re happy to proceed with the terms and conditions of Bankruptcy. At this stage you will have to provide details about any assets, your income, debts and creditors in order to see if you meet the qualifying criteria, and to see which debts can be included.
Once your application has been made, the insolvency practitioner will pass on the terms of the Bankruptcy to your creditors and the Insolvency Service. Your insolvency practitioner will inform the courts that your Bankruptcy has been approved, and file all the necessary paperwork for you.
if you come into a windfall or a pay increase, your insolvency practitioner needs to be notified immediately as this could affect the terms of your Bankruptcy.
Apply now by calling 0800 121 48 63 or use the online contact form to the right to request a call-back.
How much will I have to pay for Bankruptcy?
Bankruptcy costs £680. The debt solution provides a number of benefits, you will need the assistance of a professional insolvency advisor. The fee will be paid directly to the Insolvency Service. This fee is non-refundable. You’re only able to apply for Bankruptcy once every six years. It’s important that the information you provide on your application is accurate.
Once your application has been accepted, and the bankruptcy order has been made. Your money will now be in control by the Official Receiver. The Official Receiver will organise your interview, after this, your creditors will be informed and sent a report of your financial circumstances. Any assets you have could be sold to pay off part of your debt.
Most Bankruptcy orders will include a ‘windfall clause’, this means that if you receive any money during the course of your Bankruptcy, you will have to declare it to your insolvency practitioner as a source of income. These windfalls can include things like a pay increase at work. If you’re lucky enough to win the lottery or unfortunate enough to lose a family member, any winnings or inheritance could be passed on to your creditors as part of this windfall clause.
Who is eligible for Bankruptcy?
If you want to apply to become bankrupt, there are certain conditions which must be met in order to be considered eligible. Since Bankruptcy is a legally binding agreement between several parties, the following conditions must be met, or your application will not be accepted:
• You’re unable to pay back your debts
• Your total debt must exceed the value of your assets
• You haven’t been subject to a DRO, bankruptcy, or IVA within the last 6 years
• You have lived, had a property or owned a business within the last three years in England, Wales or Northern Ireland
The following restrictions also apply:
• Unable to borrow more than £500 without informing the lender about the Bankruptcy
• Ineligible to act as a director of a company without the court’s permission
• Unable to create, manage or promote a company without the court’s permission
• Not allowed to manage a business without informing those you do business with that you’re bankrupt
If you fall into these categories, Bankruptcy could be the right debt solution for you. To find out more about Bankruptcy, call us on 0800 121 48 63 or complete the online form on this page.
What type of debt can be covered by Bankruptcy?
Bankruptcy orders are designed to tackle multiple debts at the same time, there is a list of debts which you can include under the agreement. If you’re struggling with two or more of the following ‘non-priority debts’ listed below, Bankruptcy could help you write off your unsecured debts.
• Personal loans
• Pay day loans
• Credit cards
• Store cards
• Overdraft, including fees and charges
There are also ‘priority debts’ which can be included under a Bankruptcy order, these priority debts include any council tax arrears you owe, benefit overpayments, repossessed asset debts and utility debts such as gas, electricity and water.
There are debts which can’t be included within Bankruptcy, such as court orders permitting to child support, child maintenance, court fines or student loans. If you are having trouble making payments to any of these, they must be dealt with separately.
If any debts have amounted due to fraud, these cannot be included and will still have to be paid once you have been discharged from Bankruptcy.
Is my home at risk if I go Bankrupt?
Your home may be sold, this will depend on the equity (your share after the mortgage or any secured loans have been paid). If you’re a home owner, we recommend speaking to one of our advisors to see how this may affect the terms and conditions of any Bankruptcy order.
Need more advice?
If after reading this, you think that declaring yourself Bankrupt may be the right solution for you, contact our expert debt advisors to discuss the advantages and disadvantages of using Bankruptcy to get out of debt. We’ll provide you with advice and guidance and be able to discuss a number of wider financial solutions available to you, helping you make the right decision for your future.
Call now on 0800 121 48 63 or use the contact form on this page to request a call-back.