What is involved in going bankrupt?

Bankruptcy is an option you can take when you have debts that you cannot afford to pay.

In bankruptcy the Court appoints someone to take over the management of your financial affairs. The person is usually called the Trustee.

You can be made bankrupt by your creditors. Alternatively you can petition for your own bankruptcy, but in both cases you must owe more than £750. If you owe less than £5,000 other options are likely to be more appropriate.

Advantages of bankruptcy include:

• most creditors have to stop chasing you for the debt and make their claim to the trustee instead;
• it's a chance to make a fresh start.

There are some disadvantages to bankruptcy:

• You may lose certain assets - but your basic household goods, clothing and tools of the trade should not be taken.
• Any bank accounts you have will be frozen, although it is normally possible to open a new basic bank account after the bankruptcy order.
• Some of your debts may still be payable at the end of bankruptcy; such as Court fines, maintenance, child support payments and secured loans.
• Bankruptcy may affect your job, your home or your tenancy.
• You need to pay a deposit of £310 and a fee of £150 when you make your application. You can apply for the fee to be waived if you can't afford it but the deposit must be paid.
• You may have to make monthly payments to the Trustee. If this happens, you would normally be expected to make payments over three years.

Bankruptcy is usually worth considering if you have large debts that could not be repaid over a reasonable period of time.

 

Last Updated: 06-07-07