Are you planning to choose bankruptcy as your solution to get out of debt? If you haven’t already, you should first learn the necessary facts about bankruptcy.
By the end of this article, you will know if bankruptcy (UK) is a suitable choice for you. Let’s dig in!
What is Bankruptcy?
Bankruptcy UK is a solution for debt relief. In simple words, it is a legal procedure through which people seek debt relief, most commonly used when other more practical debt solutions (like IVAs and debt management plans) are not possible. Bankruptcy acts as a second chance for you to gain financial freedom.
However, some debts are not included in it. These include:
- Student loans
- Social fund debts
- Loans for child support
- Fraudulent debts
In bankruptcy UK, your assets are utilised to get back the amount of debt that you owe. This is an excellent way to regain financial stability if you don’t have the means to repay your debt (such as a primary income). Creditors get paid from the assets that are in possession. Some assets like tools or equipment used to continue working will be exempt.
How can I apply for bankruptcy?
If you are worried about growing financial debt and thinking about filing bankruptcy, don’t worry! The application procedure is not as difficult as you may think.
In order to begin the bankruptcy UK procedure you need to fill out an online application. The application will ask important details like your financial situation and possession details, you must answer these questions with full honesty.
You will need to provide details/documents like:
- Salary slip or monthly income details
- Outgoings
- Pension statements or benefits
- Utility bills
- Bailiff letters
Your application will be reviewed by a professional known as an official adjudicator who works for the insolvency service. They will assess whether bankruptcy suits you or not.
Your application will usually take up to 28 days to review. Once your application is approved, the next steps will start.
How much does filing for bankruptcy cost?
The application fees for filing bankruptcy are £680. You will have to pay this before applying.
Other payments vary depending upon the insolvency services you are using. You can also pay in the form of monthly instalments. We prefer you opt for instalments, as it is a practical way to pay when dealing with the other financial debts
Remember, it is super important to talk to a free debt advisor before you pay any fee. Especially if you are looking to go down the route of bankruptcy. You need to make sure you are making the correct decision based on your financial situation. If you are unsure where to start, check out our free solution finder.
What happens after filing my bankruptcy application?
You will be appointed an official receiver within two weeks of receiving your bankruptcy submission. Your bankruptcy order is based on:
- Monthly income
- Financial assets
- Outgoings
They will devise the repayment plan for you. For further discussion, you may be called to have a physical meeting or an online interview with the authorised receiver.
After completion of the whole process, the repayment of debt starts.
Your creditors make a legal claim and send it to the trustee. The money they are owed will be then returned. However, direct repayments with creditors are not part of the bankruptcy.
It’s quite common for it to take around 1 year to pay back all your debts. Then the rest of your debts are written off allowing you to make a fresh start.
However, until you are discharged, you will remain under the restrictions of bankruptcy UK. This means that you won’t be able to apply for credit of £500 or more without first notifying the lender about your bankruptcy order.
Is Bankruptcy suitable for me?
Bankruptcy is a suitable option if you can’t find any other way to pay off your debts and have fer assets.
If you reside in your own house, consider other options like debt consolidation, IVAs or debt management plans. As bankruptcy comes with the risk of your house being sold in case of insufficient equity.
If you don’t own a house and live as a tenant. Your landlord has the legal right to evict you if you fall into rent arrears. As stated previously in this article, always consult a financial advisor before filing a bankruptcy. It’s very important you do not go down the wrong financial route.
Obtain cost-free guidance regarding bankruptcy
Free debt help is available to ease your pressure to select a suitable choice.
Free debt help services have qualified debt advisors to help you decide the best option. But the most important thing is that you remain honest when discussing your financial situation.
They can only help you if they know your true current financial situation. With this, you will become debt-free much faster. Use our free debt solution finder if you are unsure where to begin.
How do debt advisors help?
While thinking of bankruptcy, seeking financial help is key.
- They are a helping hand and will never judge you.
- They provide you with information on all available options for you.
- They make sure that you are 100% confident in your selected choice.
- They always suggest alternative debt help methods to you.
- They also make sure that you are utilising all benefits applicable to your situation.
Conclusion
Considering bankruptcy (UK) is always an option when there are no other means of paying back the debt.
However, you should consider all the consequences as well. Bankruptcy is effective but does come with negative implications and can affect both you and your family. Bankruptcy can also pose a risk to your assets.
It is always beneficial to consult a financial advisor beforehand to make sure the choice you are making is most suitable for you.
