During the last 2 years, the number of bankruptcy orders made in England & Wales has risen by more then 50% to 46,000 in a single year. It is estimated that, for over 80% of those people made bankrupt, credit card spending has been the biggest single cause of their difficulties.
Fortunately, bankruptcy law in England & Wales has recently changed relaxing some of the rules and processes. Most bankrupts can expect to receive their discharge within 12 months or less. During that time, they will not be able to get credit without disclosing their bankruptcy and most will face restrictions on their bank accounts. For many, however, that is a small price to pay for a chance to straighten out their affairs without all the stress of the monthly card statements, the ‘phone-calls, and threatening letters.
For the home-owner bankruptcy is a lot less attractive. Even where there are young children in the house, a Trustee in bankruptcy has the right to demand the sale of a bankrupt's home after just one year. Rather than face that, many people will struggle on with increasingly difficult payment demands.
Where total unsecured debts are under £15,000, solving a short-term cash flow problem may be best resolved using a Debt Management Plan which may well organise the repayment of the debts included by one monthly payment. However, for anyone with extensive debts, these plans can extend for years, keeping a person locked in a mean cycle of poverty doing little more than pay the interest on debts that are years old.
Bankruptcy is usually taken as a last resort, it can be seen as the only way to escape from the repetitive demands for payment from creditors and lenders. Bankruptcy should never be taken lightly and advice should always be saught before taking bankruptcy as an option. There may be times where it can seem like the right choice, but declaring bankruptcy can have adverse effects on your credit file.
The constraints which are against you after the declaration of bankruptcy only make it a viable option in exceptional circumstances. Many who are in large amounts of debt whether it be personal or business related debt and individual voluntary arrangement is the preferred option as it provides much of the relief that you would benefit from with bankruptcy but without the harsh branding that bankruptcy may carry.
Bankruptcy can carry a number of problems for the debtor such as
- Risking current assets
- Risks to future assets
- Risks to your credit file and ability to apply for credit again
- The rollon effect to your business and home
- Periods of frequent stress
During bankruptcy your assets can be sold on in order to repay your creditors, for certain assets this can mean you loose a whole lot more for debts of low priority, leaving you subject to further problems. The property that the debtor owns is also placed at risk and can be sold on, with joint mortgages the debtors share may be sold of to the trustee.
Whether you are a homeowner or a tenant living in rented accomodation, bankruptcy can still cause problems. Home owners may not be able to move to another property as the ability to borrow is reduced.
Declaring bankruptcy should not be pursued without the advice from an independant financial adviser first hand.
If you are thinking of declaring bankruptcy then why not call us on 0845 2 605 506, we can help you!
