To many who may not know of the various routes available for those struggling with debt, the concept of bankruptcy might seem like the most obvious choice. To many, it actually is – it’s widely seen as an opportunity for you to wipe the slate clean and to ensure that all of your debts are settled without further action being taken. On paper, therefore, it may be an ideal option for those in serious debt – and without considerable assets such as properties or cars – to take if they are looking for a clean break. However, this break may not be so clean – as there are a number of factors which you must take into account before entering into such a serious arrangement.
Bankruptcy is no less than a huge decision to make when it comes to both personal and corporate finance. It is effectively declaring that you are unable to settle debts – and, should your request to declare bankruptcy be accepted, you will be able to relieve yourself from lenders who may be in pursuit of you. It is an option which does carry stigma, too – but as experienced debt support advisors, we sincerely believe bankruptcy applications should be approached with a sensible attitude and an open mind. Going bankrupt should be an avenue you take when all other alternatives have been readily explored – and while many of our customers do find themselves looking at this route as a viable option, we will always ensure to look into all other avenues before we propose you apply for such an arrangement.
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What Does a Bankruptcy Order Involve?
Going bankrupt doesn’t mean that you’re giving up finance for life – it is insolvency whereby you advise publicly that you can no longer manage the debts that you have accrued, and those which you currently owe. You can now apply for bankruptcy online rather than through the court system, which has thankfully simplified matters in a big way. Assistance with the bankruptcy register is always available from a variety of sources – and we, of course, are just one of them. We will be happy to analyse your current situation with regard to debt and will focus on whether or not bankruptcy is a viable option in terms of helping you to relieve yourself of mounting debt and interest.
Bankruptcy does come with a cost, and this is generally £680 (inclusive of VAT). You can petition for bankruptcy yourself, or your creditors may wish to push for this option should your debts to one agency alone come to more than £5000. If this is the case, it is always worth remembering that such lenders will seek to apply additional costs to cover legal fees – meaning that this is an issue that you should nip in the bud before it grows out of control.
Bankruptcy is never the first option we advise anyone take – but what we do advise is that you consult our experts as soon as you feel you are experiencing difficulties in paying for standing debt and interest that you owe. Bankruptcy cannot take into account certain debts, however, and it is a viable option if you do not have control over a series of assets. Therefore, entering into a scheme such as an IVA may be more worthwhile considering – or a trust deed, if you live in Scotland – as either of these methods will allow you to seek immediate relief providing you are willing to leverage your assets such as your home towards any debt you may owe.
There are huge benefits to declaring bankruptcy. These can include the fact that, as many people see it, it’s a clean start. It means that you no longer have to handle contact with your creditors, and this means that you can actively start again from scratch. For a lot of people who are experiencing high stress as a result of such a scenario, bankruptcy can be quite an attractive route to take. It’s also extremely viable for people who have looked into other forms of debt relief in more detail – and have found that their circumstances better fit what is known by many as the ‘last resort’. It really shouldn’t be seen that way – though we never advise to look into the option from the start!
Bankruptcy, however, does carry a number of negative factors with it that you will need to bear in mind before taking any further steps – and, rest assured, we will be on hand to guide you through the pros and the cons of petitioning for a bankruptcy arrangement in as much detail as you require.
Reasons Not to Apply for Bankruptcy
As with some other forms of debt relief and arrangement, this is an avenue that can cause considerable problems for you further down the line if you are interested in applying for credit. This, of course, means that your credit file and scoring will be impacted negatively by any bankruptcy order or action taken, and that such an action will be clearly visible on your credit file for firms to see for up to six years. If you are attempting to take out a mortgage or further credit cards and loans in the near future, this may be too much of a risk to take. In fact, you will not be able to apply for more than £500 without needing to advise a potential creditor that you have gone bankrupt. Therefore, it is never a decision to be made lightly.
There is also a stigma which comes with claiming personal bankruptcy that some people feel deeply ashamed of – as debt support advisors, we know that debt can provide insurmountable stress – and that petitioning for bankruptcy is never easy. However, we also understand that it should never be regarded as something to be ashamed of. It is a sensible option to take which ensures that creditors can be relieved and that you can effectively start again with a clean slate. Taking control of your finances at any stage is admirable – and while bankruptcy should certainly be avoided wherever possible, it is often hard to keep up with debt – and we understand the many different circumstances that can lead people to take such a route.
Therefore, never be afraid to get bankruptcy advice– for many people, thousands each year, it is a solution which provides necessary relief both financially and emotionally.
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Is a Bankruptcy Order the Only Option?
When discussing your finances with our debt advice team, we’ll be sure to take into account all applicable avenues and options when it comes to your own personal debt and circumstances. It’s incredibly important that we build a rapport and trust with you early on so that we can ensure to understand your situation as clearly as possible. We offer completely impartial, individual advice and support – without question. There are other options we will discuss with you before you consider bankruptcy as a viable avenue, too – here is a brief breakdown of options which may or may not apply to your own situation.
An IVA Debt Solution is often the most viable option available to creditors right away. Through this route, you will simply need to submit a monthly repayment to an independent practitioner, who will be able to liaise with and hold off any creditors while you make payments. This route is effective, though for many people it may not be particularly efficient. It is, however, one of the most advisable options to take if you owe several lenders considerable debt.
Similar to the IVA, a Trust Deed in Scotland would be available if you are able to make regular payments of an agreed amount. Get in touch for more details on this debt relief process.
We can provide Help with DMPs if you feel that this would be the right option for you, these are also known as Debt Management Plans. These informal arrangements are great for helping you to manage your debts – and they will ensure that creditors get money towards any debts you may owe them. This is another entry route which we think is particularly worthwhile considering when approaching debt for the first time.
If the DMP looks like a good choice for you but you are living in Scotland, Debt Arrangement Schemes are available to offer similar help. If you are a Scottish resident feel free to contact us for more information about this solution.
One of the most popular ways for dealing with these kinds of financial issues is Debt Consolidation which many people choose do to. This involves consolidating your repayments into one simple payment to avoid dealing with multiple creditors.
An F&F Order or Full and Final Settlement can be very attractive – it is essentially the option of proposing to creditors that you pay less than your total outstanding debt. This means that creditors may accept your decision – and you may be able to pay less than your total outstanding (though likely still the majority). This route can be taken if you have a lump sum or an asset than can be used to create a secure bond to pay for such a settlement. It can also be used to ward off several creditors at once.
If you are living in Scotland and think Bankruptcy is the right choice for you, there is a similar process known as Sequestration. Visit this page for Sequestration Advice to find out more about how this works and how it could help clear your debts.
Should I Declare Bankruptcy?
Never answer this question yourself until you have sought independent debt management advice. Bankruptcy orders can be fairly monumental – though we ensure that each and every one of our clients is emotionally and financially prepared to be able to make such a decision, and that they understand what is expected of them and their credit ratings. If you’re concerned about the potential need to declare bankruptcy, call us today on 0808 223 4188 and let us discuss possibilities for other options with you. Never apply for bankruptcy until you’ve spoken to us – and let us prepare you for such possibilities.