Bankruptcy is a word that can fill some people with dread, particularly when faced with the reality that they can no longer afford to pay off their existing debts.
However, one of the biggest problems is that the confusing world surrounding debt solutions often causes more confusion, anxiety and stress than the reality of the issue.
What is it?
Bankruptcy is a word that is often bandied around and can conjure up a number of stereotypes surrounding the circumstances and type of person that might be faced with this particular type of debt solution, but what does it mean, exactly?
To be able to apply for bankruptcy, your unsecured debts have to be more than your assets. If you have property, vehicles, savings or electrical goods that could be sold to clear your debts, then it is unlikely you will be considered for bankruptcy.
How do I apply for bankruptcy?
This is done through your local courts, but each process can differ depending on your area and specific situation. You can apply if you’re unable to pay your debts, but creditors can also apply to make you bankrupt if you owe them more than £750. To file for bankruptcy you will be required to pay £700 in fees, although some people with low income or receivers of benefits could be exempt from paying.
If the court agrees to your bankruptcy then it normally is granted on the same day, meaning you will be declared bankrupt immediately.
What is the process?
Bankruptcy normally last for 12 months, during which time there are a number of restrictions put in place. After this time, you are no longer responsible for your current unsecured debts, which are written off, and your creditors can no longer take any further action against you to recover the money that you owe.
What will happen to my assets?
If you own a property that has equity, then the chances are you will lose that when becoming bankrupt, and the proceeds of the sale of the property will be paid to creditors. Other options can be explored such as selling a share of the property to relatives for you to be able to remain in the home, but it is something that needs careful consideration and research before embarking on.
Individuals who are in rented accommodation should check their tenancy agreements before becoming bankrupt, as some do not allow people who have applied for the debt solution to remain in the property. Your landlord can also be informed about your current financial situation.
Can I still have a bank account after bankruptcy?
In most instances, if you declare yourself bankrupt, the bank account you were previously using is likely to be frozen or closed meaning you will need to open another one.
As well as a basic account, it might be possible to keep open one with no overdraft facility, but it is worth speaking to your bank first. There are also services called a managed bank account that you can look into after bankruptcy, which can help support you if you have had difficulties coping with your finances.
This enables you to use your salary to pay all your living costs, such as rent and bills, before debt payments are moved into a separate bills account automatically.
If you are considering filing for bankruptcy but are still unsure just what it means, then get in touch with 123 Debt Solutions for professional help.