Why Bankruptcy Should Always be a Last Resort
The dangers of bankruptcy are continuously looming for people up and down the country, as they struggle to deal with debt and feel like they’re running out of alternatives. Declaring yourself bankrupt is a viable option if the problems appear to be insurmountable, but it should always only be considered as the last resort after all other options have been exhausted. That’s because bankruptcy comes with a range of restrictions that’ll be imposed on you following the ruling, which could cause you some problems further down the line.
Applying for bankruptcy can be done in court by yourself, or your creditors could apply for it on your behalf if they’re not being paid what they are owed. However even the application for bankruptcy is a hefty one, costing £700, which includes a £525 deposit for the official receiver and a £175 court fee. The court fee can occasionally be waived for lower earners.
After being declared bankrupt the restraints last for 12 months. Following that period the bankrupt is ‘discharged’ from the remaining debts, but it can be very difficult to get even basic bank accounts during that time. There are also some other constraints imposed on you in the 12 month period that could make life tricky.
You won’t be permitted to borrow more than £500 without telling the lender about your bankruptcy status, which could put them off from letting you borrow money. There’s also a lot of business based limitations, including the rules that you won’t be allowed to act as a director of a company, manage a business with a different name without telling people you’re bankrupt or create and manage a company without the court’s permission. You won’t be able to work as an insolvency specialist, either.
These legally binding rules are all set out in the Bankruptcy Restrictions, and breaking them is regarded as a criminal offence. Declaring bankruptcy is a possible option for those with no income, no assets and large debts that they just can’t pay off. It isn’t such a good option for property owners, who could end up having to sell their home to pay off the debt. People with professional qualifications, such as solicitors, can also be barred from practicing their career if they are made bankrupt.
Upon being declared bankrupt you will be appointed a trustee who will review your assets with a view to selling them on to pay off the debt. These assets generally don’t include essential items such as clothing or things you need for the house like furniture, but if you have a particularly large debt then the trustees could seek to reclaim the home.
Bankruptcy should always be the last resort, as the consequences of declaring yourself bankrupt could be dreadful and limit your options further down the line. If you feel like debt is piling up and you have nowhere to turn, then get in touch with us. We provide free financial advice across all types of issues, including bankruptcy. Speak to specialists today and we can help you figure out how to manage that debt.