If you are struggling with unmanageable debts, you may be considering declaring bankruptcy to manage them. Bankruptcy and insolvency can feel like insurmountable obstacles to overcome, especially if you don’t know what to expect or how to approach the process. In this guide, we’ll go over the basics of what is bankruptcy, who can apply for it, and how the process works in the UK.
What is Bankruptcy?
Bankruptcy is a legal status of a person or an organisation, which states that they are unable to repay their outstanding debts. In the United Kingdom, you would apply for bankruptcy through the insolvency service.
The main reasons people choose to declare bankruptcy are unmanageable debts, loss of income and assets. When you go bankrupt, your assets are sold off and the money is used to pay back your creditors. You will also be subject to a number of restrictions, such as not being able to obtain credit over a certain amount or hold certain types of jobs.
Application Process of Bankruptcy in the UK
The first step is to make an application to the court. The next stage is for the court to consider the application and decide whether or not to grant a bankruptcy order. If the order is granted, a notice will be sent to all of the debtor’s creditors informing them of the bankruptcy.
Once a bankruptcy order has been made, an official receiver will be appointed to deal with the bankrupt’s estate. The official receiver will contact the bankrupt and arrange a meeting.
The cost of applying for bankruptcy
Bankruptcy can be an expensive process. In the UK, you must pay a £525 fee to apply, and there are also other costs associated with going bankrupt, such as insolvency practitioner fees. However, if you’re unable to pay your debts, bankruptcy may be the best option for you. You can start over by wiping out your debts and giving yourself some breathing room from your creditors.
Once you have paid your fees, you will need to attend an interview with an insolvency practitioner (IP). The IP will ask you questions about your finances and why you are unable to pay your debts. They will also explain the bankruptcy process to you and answer any questions you have. You will then be required to sign a declaration of bankruptcy.
Reasons behind declaring Bankruptcy
People often declare bankruptcy when they have unmanageable debts and can no longer make payments. This can be due to a number of reasons, including job loss, illness, or divorce. Bankruptcy can give you a fresh start by wiping out your debts and giving you a chance to rebuild your finances.
The What is bankruptcy process in the UK usually takes around 12 months and involves completing some paperwork, attending meetings with creditors, and making payments to a trustee.
There are some drawbacks to bankruptcy, such as having to give up some of your assets and being unable to get credit for a period of time. However, for many people, bankruptcy is the best option for dealing with their debt problems.
The Effects of Bankruptcy on the Individual
Bankruptcy can have a number of different effects on the individual. The most common and well-known effect is that it gives the individual a fresh start, by discharging their debts. This can provide much-needed relief, and allow the individual to get back on their feet.
However, bankruptcy also has a number of other effects, both positive and negative. It will usually result in the individual losing their home, as well as any other assets they may have. On the positive side, however, What is bankruptcy can provide a way for the individual to get out of crushing debt, and start fresh.
Effects on family members after you have declared yourself bankrupt
Finally, your family members may be contacted by creditors seeking payment from you. While bankruptcies can be a difficult process, it is sometimes necessary to get out of unmanageable debt.You can learn more about the pros and cons of bankruptcies UK and details of all other things related to debt and money management on Monemyst.