There is a word that has been turning over in your mind for some time. This word seems to hold a spell over you. To some people it is a daunting prospect, yet others consider it to be a road to redemption. You, on the other hand, are not sure if it is the right path to take. This causes indecision which leads to an increase in stress that further exacerbates the anxiety you feel.
The word you are considering is bankruptcy. What you must ascertain now, is whether that word applies to your personal set of circumstances and if it is possible to get you from a state of financial hardship to being completely free from debt.
Overwhelmed by debt
Photo courtesy of Sander van der Wel on Flickr
It is your choice, but how long can you convince yourself that everything is going to work out? How much pain are your financial troubles are causing? Many debts are accrued over a number of years and the stress of maintaining payments to creditors may well have exacted a harsh toll on you personally. If this is the case, and you have thoroughly explored other avenues to solve the situation, then once again, bankruptcy might just be the life-line you need.
You may be influenced by past stigmas. People declared bankrupt were once vilified because they were judged by society to have acted dishonestly towards creditors. Now we are aware that there are many reasons why people file for bankruptcy and a large proportion of those are attributed to situations beyond the debtor’s control, such as reduced income or job loss, divorce, separation or unexpected and prolonged ill-health. Your situation is not unique and you are not alone. Everyone deserves a fresh start.
Government statistics recently stated:
- There were 25,006 individual insolvencies in England and Wales in the first quarter of 2013.
- 6,663 bankruptcies
- 7, 219 Debt Relief Orders (DROs)
- 11,124 Individual Voluntary Arrangements (IVAs)
Bankruptcy is often seen as the last-ditch attempt to solve money problems because of implications that it may have upon your life, such as the possible sale of any property, vehicles or personal items to pay off your creditors.
However, not everyone is bound by the same constraints. If you do not own a property, vehicles or much in the way of personal items that you are overly concerned with losing, then bankruptcy may well be the right opportunity.
Individual Insolvency Register
Unfortunately, you cannot keep your bankruptcy private. You will be listed in the Individual Insolvency Register while your order is current. The bankruptcy register is an online public resource and anyone can access the files. Your details will also be kept on the bankruptcy register for 3 months after the order has been discharged from the courts. In exceptional circumstances your insolvency may even be publicised in your local newspaper
In most cases, however, bankruptcy is conducted in a personal, dignified and professional manner. Though there is a fair degree of scrutiny and hardship involved, bankruptcy is more commonly regarded as an open door to a brighter future, rather than a source of public humiliation.
You must judge for yourself the effects insolvency may have on your personal set of circumstances. Examine what it means for your family and future. Insolvency orders will be listed on your credit status for 6 years after the order is discharged. So if, for example, you planned to get a mortgage within this period, you will need to re-think your long term plans.
The effects of bankruptcy
There are many disadvantages to filing for insolvency.
- You will not be able to borrow more than £500 without informing the creditor
- Some professions such as solicitors don’t allow you to work when bankrupt
- Bank and credit card accounts will be closed
- Your house and car and any other luxury items are usually sold to pay your creditors
- Your business will be closed down, your assets sold and your staff discharged.
But the advantages are beneficial:
• You are finally relieved of the pressure of dealing with creditors
• You are given a reasonable allowance to live on
• You can finally make a fresh start and be debt free usually within 12 months, or less if you have fully cooperated with the Official Receiver.
• Your creditors will be ordered to stop court action
• If you live in rented accommodation and your rent is up to date, you have little to lose and will be allowed to continue to pay rent
There are alternatives that you might like to bear in mind. An Individual Voluntary Agreement (IVA) is considered a less drastic solution, that will in most cases, allow you to keep your property, but the duration is longer, usually over a 5-6 year period.
Alternatively, if your debts are less than £15,000 then you could qualify for a Debt Relief Order (DRO). This is a cheaper option than going bankrupt. The order will cost £90, payable over six months. However you will not qualify for a DRO if you own assets worth more than £300 or if you own a car worth £1000 or more.
It is recommended to seek advice from qualified professionals who can help to solve debt problems. The longer you delay in finding a solution to your money problems, the greater the suffering you have to endure.
If you have explored several options to solve your financial problems and reached an impasse, perhaps now is the right time to talk to the specialists about whether bankruptcy is right for you.