Bankruptcy is a legal status and form of insolvency whereby all or most of a person’s debts are written off.
What Is Bankruptcy? Who Does It Affect?
Those who find themselves in severe financial difficulties, bankruptcy is an option and may be suitable if there are no present or future means to pay off those debts in a reasonable amount of time.
Being bankrupt isn’t a permanent status, it usually lasts about a year, but it can affect your ability to obtain credit for a lot longer than that. This decision shouldn’t be taken lightly, but it could be the right option for many as a way to clear debts and make a fresh start.
Bankruptcy can write off all or most of a person’s debts. It also ensures that creditors can’t hassle or take action against you. This can give you a fresh start, wipes the slate clean, and provides you with another chance to get things right.
Key Points To Consider Before Becoming Bankrupt
Before making the decision to become bankrupt there are other options which can be considered:-
- Informal agreements – you make arrangements with your creditors and agree on a schedule for those repayments.
- Individual Voluntary Arrangements (IVA’s) – repayment agreements are negotiated by an insolvency practitioner.
- Administration Orders – an order is made for you to make monthly payments to your local court. The court then divides those payments between creditors.
- Debt Relief Orders – a formal insolvency process for people with no assets, low income and no prospect of being able to clear their debts.
How To Proceed
If you decide that bankruptcy is the only option for you, then you can follow the procedure below.
- You will have to complete an online application form and create an online account.
- You will need to provide information about your debts, income and outgoings – you should include any letters which you have received from bailiffs or enforcement agencies.
- You will need to pay a fee of £680 (adjudicator fee of £130 and a deposit of £550) which will need to be paid before you submit your application (there may be a possibility to pay in instalments if you cannot afford the fee).
- Once you have made your application it will be reviewed by an official adjudicator who works for the Insolvency Service. They’ll decide if you should be made bankrupt. You usually get a decision within 28 days of submitting your application.
- If you are made bankrupt, an Official Receiver will be appointed within two weeks of receiving the bankruptcy order. They will then assess your income, assets and outgoings.
Please note that bankruptcy affects your credit rating and credit reference agencies will keep your details on file for a minimum of six years.
How Can Nelsons Help?
Kevin Modiri
is a Partner and Solicitor in our Restructuring & Insolvency team.
If you would like to proceed with becoming bankrupt and would like some assistance with making your application, please contact Kevin or another member of the team on 0800 024 1976 or via our online form.