Understanding bankruptcy
Bankruptcy discharge usually occurs after 12 months, but it can take longer. Some debts, payments and restrictions may continue afterwards.
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What is an Bankruptcy?
Bankruptcy is a way of legally declaring your inability to pay your creditors. It is a formal debt solution for those who have an amount of debt which they cannot repay. In Bankruptcy you usually stop paying your creditors. Your creditors cannot chase you for the outstanding debt. It can provide a real fresh start for debts that will never be repaid.
You can be discharged after 12 months
Upon discharge 100% of eligible debts are written off
Bankruptcy stops any legal action now
It costs £680 to apply for bankruptcy in England and Wales. If you can't afford that, a charity may be able to help.
Pros & Cons of Bankruptcy
Pros
- You will no longer have to deal with your creditors.
- Once your bankruptcy is completed you will be able to start again financially, without any debt.
- You no longer have to make payments towards your creditors. (If you have available disposable income you will have to contribute this under an Income Payment Order for 3 years.)
Cons
- Your credit rating is likely to be severely affected.
- You cannot acquire credit of £500 or more without disclosing you are bankrupt.
- You cannot be a director of a limited company.
- You may lose your home and car.
- Some employers will not allow you to enter bankruptcy and in doing so you could lose your job. You should check your contract of employment first.
- If you receive income for employment, a private pension or any other form of income which is not state benefits then you may be asked to make payments to your bankruptcy for 3 years.
- It costs £680 to apply for bankruptcy in England and Wales. If you can't afford that, a charity may be able to help. find out more here - click here
Customers can get free debt counselling, debt adjusting and providing of credit information services from the MoneyHelper – an organisation set up by the Government to offer free and impartial advice to those in debt. For more information from MoneyHelper click here www.moneyhelper.org.uk You can find Government guidance on dealing with your creditors here.
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IVA?
A solution for people with debts over £5,000. An IVA could help you repay eligible debts through affordable payments. Any debt written off depends on your circumstances, creditor approval and successful completion of the IVA.
May not be suitable in all circumstances. Fees apply. Your credit rating may be affectedDebt management
A Debt Management Plan or DMP, is an informal agreement to pay back non-priority debts, reducing your monthly payments to a single affordable amount each month.
May not be suitable in all circumstances. Fees apply. Your credit rating may be affectedBankruptcy
Bankruptcy is a formal debt solution for people with debts they cannot repay. It’s often viewed as a last resort but can be a great solution for people without the means to repay debts.
May not be suitable in all circumstances. Fees apply. Your credit rating may be affectedDebt Relief Order
A Debt Relief Order (DRO) is an agreement designed to help people who can’t afford to repay their debts, have a debt level of less than £50,000 and don’t own their home. Zesty Money cannot advise on or arrange a DRO; an approved debt adviser must assess your circumstances.
May not be suitable in all circumstances. Fees apply. Your credit rating may be affected