Declaring bankruptcy is a way for individuals to eliminate their debt, and to essentially have a fresh start.
Bankruptcy wipes out personal debts and will take away the need for you to continue paying debtors or creditors when you don’t have the funds to do so. It can be the best or in some cases the only solution to personal debt problems. But there is a lot to consider before applying for bankruptcy.
You will lose your personal assets in the process of declaring bankruptcy, and the procedures can result in much negativity. There are a lot of consequences to consider when deciding if you should go bankrupt to clear your debt.
Here at Irwin Insolvency, we’re experts in the processing of declaring bankruptcy. We can advise you on the consequences of bankruptcy and help you to decide if this is the best way for you to clear your debts.
Should I Go Bankrupt to Clear My Debt?
Declaring bankruptcy can be the best way to clear your debt. The first thing to note though is that this isn’t for businesses or corporations. Bankruptcy only applies to individuals, despite the term being used more loosely in the wider media.
Bankruptcy is declared on a personal basis, and it allows you to wipe out your debts and for all intents and purposes to have a new financial start. For this reason, it’s a great way to clear your debt.
Declaring bankruptcy is a process that can only be done through the courts on a legal level, and it helps to have expert practitioners such as Irwin Insolvency to help you through the process.
Bankruptcy only applies to certain types of personal debt too, and there are particular debts that are not wiped out by declaring bankruptcy. Types of debt that won’t be eliminated during bankruptcy include Student Loans, plus any payments you might owe for family matters, such as child support, will still need to be paid. You will also have to continue paying any legal fines while you are bankrupt, if you owe any.
For these reasons, bankruptcy isn’t suitable for everyone. It’s important to assess how much of your personal debt will be taken away by declaring bankruptcy.
Bankruptcy lasts for at least a year, but after this time period you’re generally free – depending on the conditions of your bankruptcy – to start doing business again.
There are consequences and many of them are severe, so it’s important to weigh up both the positive and negative aspects of declaring bankruptcy.
Bankruptcy isn’t for everyone, so always speak to an expert before pursuing this course of action.
What Are the Consequences of Declaring Bankruptcy?
While it might clear your debts, declaring bankruptcy will have ranging consequences that can affect you for years to come.
In most situations – provided you haven’t declared bankruptcy already in the past – bankruptcy lasts for a whole year, which is a long time in the first instance. Consequences might continue to adversely affect you well after this yearlong period of bankruptcy has officially ended though.
Declaring bankruptcy involves paying a fee, regardless of whether you need professional help or not to apply for it. This initial cost can be difficult for someone in dire financial straits.
More than this though, as already explained, you won’t clear every type of debt and you’ll still need to make payments for certain debts that aren’t wiped out. Often, bankruptcy will also see you having to keep to scheduled payment plans that you have little control over.
Bankruptcy means that you will lose many of your personal assets, as it’s these that can be used to pay off your unpaid debts. That means that if you’re behind on mortgage payments your house can be sold. Even if you own your house outright, it might need to be sold, depending on how large your debts are. If you rent a home, then your landlord might end your lease depending on your contract.
Any other items that might be leased, such as cars or equipment, will also probably need to be returned to the owner.
Importantly, you also lose all your bank accounts and credit cards, except one that’s used for repayments. You will in the future struggle to apply for credit again, as bankruptcy is held on your financial record for a minimum of six years.
If you own a business you are in danger of losing this, while certain job roles – councillors and Members of Parliament for instance – exclude anyone who has declared bankruptcy.
Can I Declare Myself Bankrupt?
Any individual can declare themselves bankrupt, but they can also be declared bankrupt by the creditors, if the creditor is owed a debt in the sum of £5,000 or more.
Creditors can, in fact, apply for you to become bankrupt without needing your permission, as it will give them an avenue to the money that’s owed them. They need to go through a court process to prove that you can’t pay your debts and, if successful, you can be declared bankrupt against your own wishes if the financial situation warrants it.
Individuals are most likely to declare themselves bankrupt, however, as the legal process can be convoluted if problems arise. Then it’s wise to consult a professional before applying. Professionals such as Irwin Insolvency can also help to advise you on whether bankruptcy is the best solution for your debt problems in the first instance.
If you do want to declare bankruptcy, it has to go through the legal courts, however this is a process that can still be initiated online. Applying for bankruptcy will cost £680, and this can be paid in instalments over an agreed period of time. It’s not a situation or a process to take lightly though, so always consider the negative effects that declaring bankruptcy can have on not just your financial life but your personal life, before declaring it.
If you’re wondering if you should declare bankruptcy in order to clear your personal debts, then we’re here to give you the answers. Contact Irwin Insolvency and speak with our bankruptcy experts today to find out more. Call 0800 009 3173 for your free consultation.