What are the Advantages of Bankruptcy?
If your debt has become unmanageable, then bankruptcy may be a viable financial option.
- Once under the protection of a bankruptcy order, you will no longer be subject to collection actions from your creditors.
- Possessions. You can keep some of your household goods – beds, sofa, clothing, etc. After the sale of your assets, any remaining debt you have will be written off.
Long term Implications
Bankruptcy can have serious implications on your financial future - it is important, therefore, to consider the disadvantages. If you are considering bankruptcy, you should also keep in mind that there may be alternative debt solutions that you could qualify for.
What are the Disadvantages of Bankruptcy?
Although wiping your debts clear through bankruptcy might seem to offer great financial relief, there are some serious financial implications that you should consider.
- Bankruptcy is not a free option. The cost of declaring bankruptcy is at least £600.
- You will have bad credit. New credit lines will be unavailable to you during the first year of bankruptcy. After the first year, credit will generally become easier to obtain, but on a very limited basis.
- Assets may be seized. You may lose your house during the bankruptcy process and see it sold by the bankruptcy court. Other assets may be sold.
- No privacy. Your bankruptcy will not be kept private. The details of your bankruptcy will become public on the Insolvency Register, which is available online. In some cases, information about your bankruptcy may appear your newspaper.
- Bankruptcy does not clear all debts. Some of your debt will not be eliminated through a bankruptcy. For example, Student Loans, Child Maintenance Costs, and Court Fines aren't discharged through bankruptcy.
- Employment opportunities may be affected.Your employment opportunities may be affected by a bankruptcy. For example:
- You may not be able to become an member of parliament.
- You cannot act as a company director.
- You may not become a member of the local authority.
- You may not act as a Justice of the peace (JP).
- You may not practice as a Charted Accountant / Lawyer.
- You may even have to quit your current job.
- If you own a business, the Official Receiver may shut down your business as well.
Alternatives to Bankruptcy
Bankruptcy is a very serious option, so have a look at our guides to IVAs, Trust Deeds, Debt Management Plans and Debt Relief Orders to see if you can find a more suitable alternative.