When you cannot pay your debts and when the amount you owe is higher than the worth of things you own, bankruptcy debt relief could be the solution for you. The usual period for bankruptcy is 12 months, during this period most of your creditors will not be able to contact you.
Want to learn more about how bankruptcy debt relief works? We are here to provide you with the necessary information. With mymoneyoffice, you can understand all the necessary terms and conditions of bankruptcy. Let’s dig into it.
Is bankruptcy right for me?
Want to know whether bankruptcy is right for you or not, in this article check the following:
- How much will you pay to initiate bankruptcy as a form of debt relief?
- Which debts will bankruptcy cover?
- How does bankruptcy affect your home, things you own, and bills?
- How to deal with your debts before turning to bankruptcy?
How much do you have to pay?
To use bankruptcy as a form of debt relief it will require an initial fee of £680. You have to pay this amount when you decide to apply for it.
For your ease, there is an option to pay in instalments. However, paying the whole amount before applying is necessary. If you no longer have enough to pay for bankruptcy debt relief, you can seek help from a debt charity or a search for grant.
You can check for grants by using the turn2us website. (https://grants-search.turn2us.org.uk/)
If you have extra income, the officials may ask you to pay your towards bankruptcy debts. The conditions in which you don’t have to make payments are:
- Your income is from benefits
- There is no extra income after paying your critical living expenses.
Which debts will bankruptcy cover?
Bankruptcy covers the following debts:
Unsecured Debts:
This includes credit card payments, payday loans, store cards, and overdrafts. These debts are not backed by collateral and so can be included in bankruptcy debt relief.
Utility Bills:
Bankruptcy will cover debts linked to the utility services such as gas, electricity, water, and telephone bills.
Council tax arrears:
Your unpaid council tax will also be covered by bankruptcy.
Rent arrears:
If you owe rent to your landlord, these debts will be included in your bankruptcy order. If your landlord has attained a possession order or an eviction notice, bankruptcy may not help from eviction.
Tax debts:
Income duty, VAT, and other duty debts can be included in bankruptcy. Still, there are certain conditions and rules regarding the discharge of tax debts. So it’s important to consult professional counsel for specific guidance.
Court judgements and forfeitures:
Debts performed from court judgements, similar to county court judgements (CCJs), can be included in ruin. However, certain fines and debts related to felonious crimes may not be discharged.
Adding debts to your bankruptcy order
There are two rules that will allow you to add debts to a bankruptcy order once it has begun:
– You took out the debt before you went into bankruptcy.
– You are told to make payment on a debt incurred due to something that happened before entering bankruptcy.
Debts that are added after entering into bankruptcy will be treated like any other debt within a bankruptcy order.
You will still have to pay:
- Any secured debts – for example, you will need to keep paying your mortgage and any other debts secured on your home. If you do fall behind on your mortgage payments bankruptcy will not protect you from potential repossession of your home.
- Student loans
- Conservation disbursements and child brace loans
- Any payment a court has ranged you to make under a confiscation order, for instance, for drug trafficking.
- Debts you owe because of another person’s injury or death, although you might be suitable to interrogate the court to order that you do not have to pay this debt.
How does bankruptcy affect your home, things you own, and bills?
Bankruptcy can have severe consequences on your home, your belongings, and your bills, you might not need to relocate if you go bankrupt. Relocation is based on factors like whether you have a home, rent a home, or share your place with someone else.
An ‘official receiver’ will decide what to do with your house after bankruptcy.
It usually takes more work to get a new place after bankruptcy. This is because your credit score will reflect bankruptcy for up to six years. Due to this, it is harder to get a new mortgage or tenancy.
If you rent a house
There are few chances you will lose a rental house due to bankruptcy. If you go into bankruptcy The ‘official receiver’ will always ensure you have enough money to pay your rent. Your landlord will not receive any official document regarding your bankruptcy if you pay all your rent on time. The condition is termed as being in arrears.
If you have your own house
If you own your house, the ‘official receiver’ will likely urge you to sell in order to pay your debts. But we suggest you not sell your house for less than it’s worth nor give your property away. If the official receiver finds out you have done this:
– You might have to follow additional rules called a bankruptcy restriction order.
– You might be fined or face imprisonment.
– The official receiver might repossess the house from the person you gave or sold it to.
If you still own your home there is a high possibility you might be able to stop or delay the official receiver from selling it
How to deal with debts before bankruptcy?
An official receiver will always check if you have tried enough to avoid bankruptcy. For instance, they will verify if you:
- Paid some debts before others.
- Spent or borrowed excessively.
- Have shared incorrect details with any lender to borrow money you may not correctly have access to.
if you have done some of these things it is still possible to go into bankruptcy. However you may need to follow bankruptcy restrictions for longer.
Conclusion
To get bankruptcy debt relief, you must understand all conditions as it is an important matter for your financial future. With bankruptcy, you will get out of the debt once bankruptcy is over. We suggest you take professional advice before filing for bankruptcy. It affects your credit score and stays on the public record for six years.
If you are unsure on where to start you can speak to a debt advisor using our free solution finder.
