To resolve overwhelming debt, Bankruptcy is a legitimate debt management solution used by people in the UK, but have you ever wondered how it works?
Seeking good debt management methods is recommended if you have uncontrollable debt and want to eliminate it. Debts come with financial problems but they are also directly linked to the mental health issue too. It is important that if you are feeling anxious or sad that you take the best actionable steps to regain financial control.
Don’t worry, in the UK regulated, professional help is available. In this article we’re going to look at what Bankruptcy proceedings UK could do for you alongside both the advantages and disadvantages.
What is the process of Bankruptcy?
Bankruptcy is a legitimate and regulated process that provides aid to people in overwhelming debt. To get a fresh start, bankruptcy could be your helping hand.
A series of steps are involved while completing the bankruptcy process.
First, you need to assess your financial condition. To declare yourself bankrupt you need to have a least £5000 worth of debt. Consult a professional for further advice if you are unsure. mymoneyoffice offer a free solution finder that can assess your financial situation and put you in touch with a debt advisor.
If you have done your research and are confident that bankruptcy is the correct debt solution for you it’s time to go ahead and complete the application process.
It’s important to note that you will need to pay a fee of £680. 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 search for a grant. You can check for grants by using the turn2us website. (https://grants-search.turn2us.org.uk/)
You will then have to apply to the insolvency service. A person known as an ‘adjudicator’ from the insolvency service will decide whether or not to accept your bankruptcy application. Upon successful application you will be granted a bankruptcy order via written confirmation.
As a part of the bankruptcy proceedings (UK), the official receiver assesses all your financial assets. They will then decide which assets to sell in order to repay your creditors. Essential things like household items and work tools/equipment will not be included in the sale items. You should keep in mind that the ownership of your house is at stake while going through bankruptcy.
It is important to organise a meeting with the creditors to discuss your bankruptcy proceedings (UK) in more detail. It is necessary to avoid any misconduct or irresponsible behaviour.
Consequences of Bankruptcy
Though bankruptcy ends after a period of time, its impact on your finances will remain for slightly longer. It is always worth understanding the consequences of bankruptcy before motioning the arrangement.
– After bankruptcy, the official receiver will take a look at your finances and current individual situation. In particular they will look at your income and spending. They do this to gauge whether you have anything left over each month that can contribute towards your debts and administration fees. If you have more than £20 / month disposable income available, you may need to continue payments to the sanctioned receiver. This is known as an income payment arrangement (IPA).
– Bankruptcy will affect your credit score for around 6 years. During this time you may struggle to take out any credit. This will make it increasingly difficult to obtain mortgages or loans.
– If you’re renting a home, it’s worth noting that your landlord has a right to end your residency.
– You may lose your home if you’re unfit to pay your mortgage or if your property was sold by the official receiver to repay your debts.
– Some professions, like those in law and finance, don’t let you continue in employment if declared bankrupt. Bankruptcy will be recorded on a public register, so others will be able to see your fiscal status and could use this against you.
– Bankruptcy may also affect your immigration status.
These downsides can be significant. Before deciding to apply for bankruptcy, it’s worth seeking professional debt advice. Debt charities like Citizens Advice and StepChange have expansive free help. Alternatively you can use our free solution finder to speak to a professional debt advisor today.
Advantages of Bankruptcy
There are several advantages of Bankruptcy:
- Bankruptcy wipes all your debt and will give you a fresh start.
- Bankruptcy will allow you to keep some of your assets these include:
Tools or vehicles required for your job / income.
Household items such as clothes and bedding.
Money for essentials (e.g to buy food and utilities)
Money held in a joint account belonging to a partner.
Any pension money.
- Bankruptcy can stop the consequences of default missed payments.
- Bankruptcy will help you to cut your contacts with the creditor, resulting in no more letters and calls chasing for payment.
Disadvantages of Bankruptcy
The following are the disadvantages of Bankruptcy:
- Details of Bankruptcy will stay on the public record. This means it is in the public domain and can have negative impacts on employment and immigration.
- Your home may be sold (depending on the amount of equity).
- You will not be able to borrow more than £500 without notifying the lender.
- Bankruptcy will stay on your credit score for 6 years, this will make getting loans / mortgages more difficult.
- You will have to liquidate your non-essential assets.
- Bankruptcy may make it hard for you to regain employment and you will not be able to act as the director of a company (unless the court has given permission).
No matter how huge your debt amount is, it can still be controlled. Therefore, you need not worry. There’s help available.
To seek help in the form of Bankruptcy, you should first get professional help. They will assess your financial condition based on the amount you owe. If you are unsure on where to start you can speak to a debt advisor using our free solution finder.