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Declaring bankruptcy can sometimes seem like the only option when you or your business is unable to pay multiple debtors.
In many cases, it is the quickest and simplest way to clear an overwhelming debt.
To become bankrupt, you must first apply to the court for a bankruptcy order. You may also be made bankrupt on behalf of creditors who have been hitherto unable to relinquish funds from you. For a step by step guide to becoming bankrupt, this is a good place to start, though it’s essential that you seek specialist advice.
Becoming bankrupt is a highly life-changing instance, and it’s important you know exactly what you are getting into before you make the first steps.
- After declaring bankruptcy, your assets will be seized to pay off your debts. This can be anything from your house to your TV.
- Your name and your details will be published on a bankruptcy register.
- During the 12 month period usually required to free you from bankruptcy, you must adhere to the ‘bankruptcy restrictions’.
The bankruptcy restrictions
These are restrictions put in place after your bankruptcy and must be followed by law.
- You may not borrow more than £500 without first informing the lender of your bankruptcy
- You may not start up or manage a business without the court’s express permission
- You may not act as a director of any company
- You may not take a different name and manage a business
- You may not work as an authorised debt specialist
If you do not follow these orders, you may face a penalty of additional time added onto your bankruptcy period. If your bankruptcy has come about as a result of dishonest behaviour on your part, this time may also be extended.
Is declaring bankruptcy expensive?
Many believe that you can declare yourself bankrupt for free. In actuality, declaring bankruptcy can amount to additional costs.
It is a common misconception that the bankruptcy process is free. Unfortunately, it’s not – there are court costs that run into hundreds of pounds. Services like business recovery from Wilson Field can help people in financial difficulty, and work closely with clients to work out an appropriate affordable solution to their debt problems.
In order to declare yourself bankrupt, you must first pay a fee of £175 to the court. After this, you must pay a total of £525 to the Official Receiver, who will usually act as your trustee.
Your income and surplus income will be assessed carefully, and you will be expected to pay your outstanding debts with this surplus – this does not include the money needed to buy food.
As we talked about before, the restrictions are pretty strict, so this is a last resort solution. Always seek professional help so you can weigh the pros and cons and make an educated decision. There are alternate solutions that are not as extreme as declaring bankruptcy, and could help put your business back on its feet, in exchange for a few sacrifices. Make sure you understand all the implications before going one way or the other.
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Thank you for sharing this. I am planning on filing for bankruptcy, and I want to make sure I am completely prepared. It sounds like I should talk to an attorney before declaring. They know bankruptcy law the best, so they would definitely be able to tell me what to be prepared for!
I personally think that it is a really good idea to completely understand bankruptcy before filing. Right now my sister is trying to find a good bankruptcy lawyer to help her understand more about it. She would really like to be able to pay off her debts, so it would be really good for her to understand how this works. Thank you for sharing more about bankruptcy and the restrictions that come with it. It was really helpful, and I am sure that this information will also be really helpful to my sister!
Thank you for sharing more about bankruptcy. I have been struggling with debts for quite some time, and it can be difficult to deal with the creditors all the time. I would really like to learn more about this process of bankruptcy and what it involves so that I am ready for it. It is especially good to know that there are certain restrictions and that there are certain things I can’t do. It might be good for me to get help from a professional so that I am sure it is done properly. Thank you for the great post!
I didn’t fully realize that there were these five strict rules that every person has to adhere to when filing for bankruptcy. It makes a lot of sense to be restricted from being a debt specialist and other things like that. If I were using a business entity to help me manage my money, I would want to know how well they’ve done with their money.
Excellent post.
Quite informative post. There are many great reasons why people file for bankruptcy. They should consult a bankruptcy lawyer before jumping into it, so they can know the best fit for their circumstances.
Thank you for raising awareness about bankruptcy. I have some family members that are struggling with this problem, and I was looking for ways to advise them. This article helped me learn a lot of things about bankruptcy, but mostly just helped me see that making a good, educated decision is the best thing to do. I will definitely tell my family about these tips, and beg them to hire an attorney before doing anything rash.