One debt solution which can help to resolve problematic debts is bankruptcy. Entering a bankruptcy solution can impact on your credit rating. Bankruptcy is one of the most well known debt solutions and in some instances is the best option to resolving debt worries.
There are different routes you can take to enter bankruptcy and it will depend on your financial circumstances which is the most suitable for you. It’s important you seek debt advice before entering bankruptcy as you may be more suited to a debt management plan or IVA, depending on your financial situation.
You can seek debt advice from Debt Support Trust, a registered money advice charity, on 0800 085 0226.
Routes Into Bankruptcy
Debtor Petition: You can petition for your own bankruptcy online. The cost of bankruptcy is £655. It’s best to get debt advice from a registered money advice charity before entering bankruptcy.
Creditor Petition: So long as they are owed £750 a creditor can pay the court fees and administration fees to have you declared bankrupt. For some people this is actually the best solution for them because it saves them paying for their own bankruptcy.
Debt Relief Order: Although this is a type of debtor petitioned bankruptcy it’s also a specific debt solution in it’s own right. If you have a low disposable income, few assets and debts below £15,000 this might be the best debt solution for you. It costs £90 and is not refundable if you application is rejected.
Debts Not Included
Student Loans: These are not included and will still need to be paid even after bankruptcy has ended
Fines: Some fines may not be included in bankruptcy and you should check these before entering the solution
Secured Loans: Any mortgage or loan secured against an asset is not included in bankruptcy however property can be impacted by the solution
- Creditors – You will no longer have to deal with your creditors, if you do have to make payments they will be made to the official receiver
- Fresh Start – Once your bankruptcy ends after 1 year, your credit rating will start to repair itself and you can start again financially, without debt
- More Money – You may find you will have more money for essentials you were cutting back on before such as food or clothing
- Credit Rating – Your credit rating will be negatively impacted for the following 6 years after the bankruptcy has ended
- Assets – Any equity in your property or value in other assets could be at risk when entering bankruptcy
- Credit Facility – You won’t be able to get any credit above £500 while in the debt solution
- Company Position – You are not allowed to be a director of a limited company