Filing for Bancruptsy

The implications of bancruptsy explained...

In the UK nearly 100,000 people a year file bancruptsy. This figured has almost doubled in the last ten years. Money Advice Direct is concerned that many people in the UK do not understand the implications of bancruptsy, thinking that it's an easy way out of debt with no real consequences.

In 2002 the government relaxed the bankruptcy law by reducing the bancruptsy period to one year instead of three. For many people, this made bankruptcy an attractive option. However, the record of bankruptcy will remain on credit files for six years.

The advice team at Money Advice Direct feel it is important that the UK public understand the implications on taking out cheap loans, obtaining credit and obtaining employment after bancruptsy is filed.

Common Bankruptcy Questions

• Can a local council make an individual bankrupt for not paying their council tax?
  Yes, a council can make you bankrupt just like any other lender for any debt over £750
• Will anyone know if you have gone bankrupt?
  Bankruptcy orders in the public domain. They are advertised in the London Gazette and 2 local newspapers. The information made public on the Individual Insolvency Register
• Does bancruptsy show on your credit file?
  If you have been declared bankrupt, this will also show on your Credit File. Like a CCJ, this information will remain on your Credit File for six years.
• Will bancruptsy affect your ability to get a job?
  In certain professions, you could run the risk of losing your job. A person will also be stopped from being a company director unless the court grants permission.
• Will I have to pay my debts if I go bankrupt? Is it FREE to go bankrupt?
  No, It costs about £500. In some circumstances the court fee of £150 can be waived. If you receive income-based benefits such as Income Support then the court fee should be waived. The fee can also be waived in cases of hardship. You can apply for exemption using form EX160A. Some utility companies offer trust funds to those experiencing financial hardship to pay for the bankruptcy fess. You should contact your gas, electric and water suppliers and ask if they run such a scheme.
• No one will find out about me going bankrupt, will they?
  Details of your bankruptcy are published in the London Gazette and your local paper. The official receiver will also tell your landlord or mortgage provider and your banks. Details of bankruptcy also appear on your credit file and remain there for six years.
• Can I keep my car if I go bankrupt?
  If the car is not worth much, say under £3,000 and you can prove that you need it for work, it may be treated as exempt from the list of assets by the official receiver.
• If I win the lottery can I keep the money?
  If you come into any money while the bankruptcy order is still in place, it will certainly be taken away. This is treated as a windfall.
• Is bancruptsy the easy way out of paying my debts?
  Recent changes to bankruptcy law have reduced the period that most people have to remain bankrupt before they are discharged, but you will lose almost all your assets and are likely to pay a lot more when you borrow money once you are discharged because you represent a greater risk to the lender.
• What is the best way to avoid bankruptcy?
  IVAs are suitable for people who earn a regular income, have debts in excess of £15,000, a major asset they want to protect, a high-level job and a level of discipline to see the contract through to conclusion. A typical IVA client will be a young professional in a good job that has simply borrowed too much money.

An IVA is a formal court agreement between lender and borrower. The debtor will promise to pay a set monthly sum for between three and five years in return for a portion of the debt being written off. If the contract fails, the debt reverts to the original level regardless of how much has already been paid off and the individual is likely to be made bankrupt anyway.

Bankruptcy is a severe last resort if you are in serious debt and no other debt solutions, such as an IVA (Individual Voluntary Arrangement) or Debt Management Plan can save you from going bankrupt. Bankruptcy protects you from people you owe money to and allows you to start afresh, but you need to think very carefully about all the implications it will have.

Common Misspellings of bankruptcy:-

• Bankrupty
• Bancraptcy
• Bancrupsty
• Bankrupcy
• Bancrupsy
• Bakruptcy
• Bankrupsy
• Bancruptcy
• Bakrupcy
• Bancrupcy
• Bancruptsy
• Bakruptsy
• Bankruptsy

If you're struggling with debts, they may seem impossible to manage. However, there are ways to get out of debt, no matter how bad the situation seems.

We can offer confidential and non-judgemental debt advice to help you. To get advice call 0800 074 6918 or log on to www.insolvencyhelpline.co.uk

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