If your financial problems have reached the point where you do not see a way out and you feel as though you are drowning in debt, your best way out is through declaring bankruptcy. Filing may well allow you to get your finances back on track
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At first glance, bankruptcy may appear to be an easy way out
of debt problems, but is it the only answer?
What is the real cost of bankruptcy?
Before considering bankruptcy, there are a multitude of factors that must
be considered, many of which are best explained by a specialist debt management
company.
The process of going bankrupt is actually quite simple:
- Complete
declaration forms available from your local county court.
- Provide
details of all assets you own and all debts you owe.
- Pay
the associated court fee and administration deposit.
Bankruptcy can be a same-day service! But should you
consider it at all?
Following the above steps, you will be issued with a
Bankruptcy Order. You will then need to
meet the Official Receiver in your area.
Their role is to review your circumstances and ensure you meet the
conditions of the bankruptcy. This will
involve discussing your debts. Once the
bankruptcy takes effect, you will be unable to acquire any other kind of debt
solution, such as debt management, a consolidation loan, or an IVA.
The duration of bankruptcy usually lasts one year. In 2004 this was reduced from three
years. Once you are discharged from your
bankruptcy you are able to start again debt free.
Sounds easy doesnt it?
Many people think it is an easy option for those in serious debt. However, the negative, long lasting consequences
of bankruptcy need to be taken into account as they can have a lasting impact
on your life.
You and Your Home
The trustee associated with your bankruptcy has three years
to deal with your home or any property you own.
During these three years the trustee can:
·
Put your property up for sale.
·
Have a charging order issued. This means that any money generated by the
property, through rent or sale, will got to the trustee.
·
Arrange terms for you to buy the trustees
interest in the property. These terms
can be arranged with those with whom you share ownership of the property.
Your bankruptcy terms usually last one year. However you are at risk of further action, in
terms of your assets, for a further two years.
Many people forget that after the expiration of their bankruptcy order, their
home, or their share of it, remains in the hands of the trustee.
At worst this can mean your house is sold regardless of your
bankruptcy status. The consequences of
this can be devastating for your family.
As mentioned above, this can also be the case if you own a share in a
property.
Bankruptcy Restriction Order (BRO)
A BRO is an extension of a Bankruptcy Order that can be
imposed on the debtor at the end of the bankruptcy terms, which is usually one
year. A BRO is issued if the Official
Receiver deems that the debtor has been irresponsible during the terms of their
bankruptcy.
Examples of irresponsible behaviour could be:
- Gaining
more debt during their bankruptcy period.
- Gaining
more debt with the intention of applying for bankruptcy.
- Selling
assets and giving the money to family members.
Consequences of a BRO
- You
cannot be a director of a company.
- Creditors
must be made aware of your bankruptcy status if you apply for credit for
more than £500.
- If
you are trading you have to inform those you trade with about your
bankruptcy status and the name you traded under when declared bankrupt.
- These
restrictions can last between 2 and 15 years.
Bankruptcy can be seen as an easy solution to debt
problems, but many problems can result. Whether
or not bankruptcy is right for you depends largely on your own unique
circumstances. Sure you seek advice from a debt management professional before
you go ahead.
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