It’s a simple fact of modern day life that many people find themselves with debt problems that effectively make them insolvent and the course of action they take is to declare themselves bankrupt. It’s also the case that many of these folk don’t realise the full implications of bankruptcy or don’t take the professional advice they need to ensure it is the best option to solve their problems.
The bankruptcy procedure
The bankruptcy procedure means that someone has entered into a legal process that enables them to agree an affordable payment to their creditors, usually for a period of thirty six months, and to write off their unaffordable debt. They will normally be discharged from bankruptcy after twelve months. During this period they have to follow the rules of the bankruptcy procedure and there are restrictions on what they can do financially and also with regard to other matters such as being the director of a limited company.
So the first milestone in getting out of bankruptcy is when you receive your letter of discharge which is the stage at which you are legally released from your bankruptcy order. You should ensure you get a copy of your bankruptcy discharge certificate which you can get from the court that originally made you bankrupt. This is an important point in the process and many people find an emotional release and psychological boost when they reach this stage. From a practical point of view this is a significant marker where your financial status options can start to improve. At this point for example you may find your bank is willing to extend limited banking facilities and you can consider previously restricted roles such as becoming a company director.
Another important step at this stage is to check your credit report to ensure it is accurate and up to date and that your discharge is properly recorded. Whilst your bankruptcy details will stay on your credit file for six years there are a range of actions you can take to start repairing your credit rating. You will however find it difficult to get credit and getting a mortgage will be nigh impossible whilst your bankruptcy is showing on your credit file.
You can use a pre-pay credit card to start back on the road to financial normality and with time can apply for credit damaged credit cards. A rule of thumb is that the longer the timescale since your bankruptcy then the more likely you are to be seen as credit worthy. Work hard at the factors that will improve your credit rating such as paying bills like mobile phone accounts on time and not getting into a default situation with anything. Open a savings account, and even if it’s only small amounts, get into the habit of putting money away on a regular basis.
Let go of any guilt or shame. It’s important to realise that you are not alone and thousands of people go bankrupt every year in the UK. You have now come through it and got to the other end so make the most of it. This is the opportunity to put your difficult financial past behind you and make a fresh start. You can now approach your relationship with money in a different way and embrace a lifestyle that will keep you debt free. It’s all about a step at a time but by being cautious and working to a predetermined plan you can improve your circumstances and move on to a better life.