Bankruptcy is a serious step and a big decision to make but for many people with substantial debt problems it can not only be the right decision to make but the only decision that will fully and properly resolve a major debt problem. The decision on whether bankruptcy is the right route to take is relative to your circumstances and not purely dependent on the size of your debt.
If you find yourself in the position where your debts are at a level where, for you in your present circumstances, it is unlikely that you will be able to pay them off in any kind of sensible timescale then bankruptcy would be a consideration. To declare bankruptcy you should be effectively insolvent which means that you can’t pay off your debts as they become due. If you are a homeowner or have other assets of value then this is a key consideration in your decision making process as you may well lose your home and assets to pay off your creditors.
How the process works
You become bankrupt when a bankruptcy order is made against you by the Courts. This can be undertaken through three alternative methods. The first is where you make yourself bankrupt by filling in the appropriate forms and applying to the Court. The second method is where one of your creditors applies to make you bankrupt and the third option is where you have already been in a formal debt agreement such as an IVA and haven’t abided by the terms and consequently the Trustee makes you bankrupt.
Once you have been made bankrupt a Trustee or Official Receiver is appointed, who needs to be a licensed insolvency practitioner, who will take charge of your assets in order to sell them and realise as much as possible for your creditors. You have no real say in the process and the Trustee is obligated by law to follow a strict set of rules and regulations.
The detailed procedures are different depending on which part of the UK you reside in but the principles of all are very similar consisting of a process that realises your assets for the benefit of your creditors, requiring a payment from your disposable income if you can afford it and then writing off the balance of your debt. The whole idea of the personal bankruptcy process is to provide an effective and legal way of resolving the debt issue and bringing it to a final conclusion that pays whatever funds are reasonably available to the creditors and enables the debtor to be clear themselves of their debt.
If payments are agreed as part of the terms of the bankruptcy then these will normally be made to the Trustee for a three year period. The Trustee will organise all correspondence with your creditors and you will not have to deal with your creditors at all at any time. Any remaining debt is then written off. Discharge from bankruptcy is normally after twelve months.
There is much to be considered with the bankruptcy process and it is always advisable to contact a professional debt advisor for help and advice. They will be able to assess your circumstances and advise if it is the right option for you and hopefully guide you successfully through the process.