What You Should Know About Bankruptcy
Bankruptcy may feel like an easy way to get rid of debt and move on with your life. For some individuals this may be the only way to solve their financial problems, but in the many of cases it is possible to pay off your debt without seriously damaging your financial future.
If you are considering bankruptcy, here are a few of the costs you’ll incur for opting to dump your debt:
- Your name, address and birthday will be listed on the bankruptcy and insolvency record. This list is available to the public online.
- You’ll have to pay a fee of £525 for handling and £180 for court costs.
- You will be assigned an official receiver. They will likely conduct an interview with you. You’ll be required to provide all information about your debts.
- Your official receiver will audit your financial history and determine what property can be sold to help pay off your debts.
- If you file bankruptcy you cannot borrow more than £500 without disclosing your financial status, act as a director for any company, build or promote a company without permission from the bankruptcy court or work as an insolvency practitioner.
- Any of your assets could be sold to pay a portion of your debt if they can be reasonably replaced for less than it would cost to sell them.
- Your bank accounts will be frozen and you are required to hand over all of your bank cards, checkbooks and credit cards.
Bankruptcy restrictions last for a year. However, certain issues including failure to cooperate could delay your release from the restrictions. Your restrictions can be extended if you are dishonest about income or fail to report assets.
Creditors will be able to see this debt on your credit report. This will make it more difficult to get a home or auto loan. You will almost certainly have higher interest rates than those who don’t have a bankruptcy on their file.
The best way to avoid bankruptcy is to avoid debt. But, if you are already in debt and your financial doesn’t allow you to continue making timely payments, there are still a few things you can do.
- Benefits: If you are struggling with repayments and bills, be sure to review all possible grants and benefits that may be available to you. These discounts and concessions may be enough to help you get back on top of your finances. Giving you more flexibility in paying down debt.
- Talk to your creditors: Talk to them before your bills get sent to collections. Many companies are willing to negotiate lower payments and/or settlements. If you’ve already waited too long and you now dealing with debt collectors, they are usually allowed to accept settlements or lower monthly payment arrangements.
- Get a second job: This isn’t ideal for most people, but working a second part-time job, taking on freelance work or doing odd jobs can make it easier to pay your debt back. Once it’s paid off you can quit your second job and start making smarter financial decisions without a bankruptcy hanging over your head.
- Sell and save: Cut expenses, sell personal items and use the cash to pay back your debtors. You’ll feel better and still remain eligible for home loans and auto loans.
Bankruptcy is a big decision but can be the right option depending on your situation. Discussing your circumstances with a professional is important. There are numerous non-profits and government sponsored programs which can provide this assistance. If you are serious about considering bankruptcy, make sure you are completely informed on its benefits and drawbacks. Understanding the consequences is as important if not more important than the benefits.
Category: Bankruptcy
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