What is Bankruptcy?

Bankruptcy is a form of insolvency which can be used when you are unable to repay your debts. There are several factors you should consider before deciding if Bankruptcy may be a suitable option.

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Declaring Bankruptcy – How does it work?

If you’ve decided to declare Bankruptcy, then the first step should always be to seek specialist debt advice to make sure this solution gives the best outcome for you.

If you want to proceed, the next step is to fill out the form on the GOV website as we can’t assist you in setting up Bankruptcy. There is a fee involved with this method. Once the application has been completed, an adjudicator will determine whether to approve or reject Bankruptcy.

If you’re officially declared bankrupt, then an individual known as the ‘official receiver’ will take control of your money and assets.

What’s the cost to file Bankruptcy?

The cost to file Bankruptcy is £680. This fee can be paid all in one go or through instalments. The minimum amount you can pay periodically for Bankruptcy is £5 and, in theory, you can make as many payments as you need to cover the cost.

Furthermore, if you change your mind before submitting your application and no longer wish to make yourself bankrupt, you should be able to reclaim the fee.

What happens when you declare Bankruptcy?

Within two weeks of being declared bankrupt, an interview will be arranged with the official receiver to examine your assets and finances. This individual will examine your creditors, how much you owe, and divide up what you have to help your lenders reclaim as much of their money as possible.

Legally, you must co-operate with the official receiver.

Alternatives to Bankruptcy

Bankruptcy isn’t right for everyone – mainly because your home and possessions can be sold to repay what you owe. Fortunately, there are alternatives – such as an IVA. We examine the differences between this and Bankruptcy below:

Bankruptcy or IVA – what’s the difference?

Although there are several differences between these two options, IVAs and Bankruptcy are both forms of insolvency. As a result, both will appear on your credit file – for six years – and your name will be entered onto a public database called the Individual Insolvency Register.

Furthermore, both solutions will result in debts ultimately being written off and stop communications between you and your creditors.

Although Bankruptcy and IVA are similar in some ways, there are several key differences. For example:

You could keep your home with an IVA

Once Bankruptcy has been declared, your home might need to be sold. With an IVA, this situation is less likely to occur.

Bankruptcy might result in eviction

If you don’t own your home, but rent, an IVA shouldn’t affect this. However, some landlords include a clause in tenancy agreements stating Bankruptcy will result in eviction.

An IVA takes longer to resolve

If payments need to be made, these usually last for up to three years in the case of Bankruptcy and around five to six in the case of an IVA.

With an IVA, you could keep your car

Unless it is essential (for example, it’s needed for work) your vehicle may have to be sold in the event of Bankruptcy depending on it's value. An IVA shouldn’t have any impact on this however, but again, this depends on how much your vehicle is worth.

An IVA has less effect on your job than Bankruptcy

Although both might have some effect on your employment. Bankruptcy typically has more serious consequences. For example, solicitors and estate agents typically bar those affected from membership.

Is an IVA better than Bankruptcy?

Ultimately, whether an IVA would be better than Bankruptcy depends on your situation. However, an IVA may be a good solution if you have assets you want to protect and still have some form of income coming in to repay your creditors.

To find out which one may be right for you, click the button below:

IVA or Bankruptcy?

How do I apply for Bankruptcy?

Bankruptcy is often considered a ‘last resort’ option to resolving your debts. Although you may feel this solution is right for you, we can use our expert knowledge to identify if this is truly the case. If it is, we’ll support you where we can.

Alternatively, we might determine that a solution such as IVA could benefit you far more – and ultimately leave you better off in the long run. After all, you almost certainly want to retain control of your property.

Get in touch today for a no-obligation chat with one of our specialist advisors. They don’t preach, judge, or condescend – they just want to help you with your finances.

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Why people choose us

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  • 15+ years’ experience across our companies in dealing with debt.
  • Helped 15,377* people start their journey towards financial freedom.
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* As of 02/02/21 15,377 of our customers were in an active IVA. ** Average unsecured debt anticipated to be written off for IVAs approved between 1 January 2020 and 31 December 2020 is £10,568, based upon successful completion. *** Based on 363 independent verified Feefo reviews as of 10th March 2021, for the full details of these please click here.

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Bankruptcy FAQs

Bankruptcy usually lasts for at least 12 months.

The pros and cons of Bankruptcy are similar to those of an IVA. For example, your debts will be written off and you won’t need to worry about creditor contact. However, the disadvantages include potentially giving up your car or home and the negative effects on your credit score.

There are a few ways where Bankruptcy proceedings can be stopped if initiated by a creditor. One of those actions can be by taking out an IVA and resolving your debts that way.

Details of Bankruptcy will stay on your credit report for six years after the date the Bankruptcy order was granted. During this time, and while rebuilding your credit score, you are likely to find it very difficult to obtain additional lending or other financial products.

Although it’s theoretically possible to obtain a mortgage after Bankruptcy, this is likely to be a challenge. You may need to find a mortgage lender who specialises in customers who’ve previously been made bankrupt.

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