Bankruptcy is a phrase commonly associated with being in debt. If you are struggling financially and can't meet your contractual payments you may feel the only option is to go bankrupt. In some instances, Bankruptcy will be the best advice, however before making a decision you should contact a free independent charity and get honest bankruptcy advice.
Bankruptcy is an insolvency solution for people who are unable to repay their unsecured debt. Bankruptcy advice is available from Debt Support Trust for free by telephoning 0800 085 0226.
In a Bankruptcy, you are agreeing to pay a sum of money to apply to enter the solution. The Bankruptcy will be granted either by the local court or an approved money advisor who reviews your application.
In some instances, a person in debt may decide to put a proposal to their creditors to repay a percentage of the money they borrowed, with the rest being cleared at the end. These solutions are an IVA (England, Wales and Northern Ireland) and a Protected Trust Deed (Scotland).
Under a Bankruptcy your assets will only be sold if there is a financial benefit after fees and charges have been taken into account. For instance, if your house is in negative equity then there would be little point selling the property if it would not raise money for the benefit of your creditors.
If you are in employment it's likely you will be asked to make a contribution towards your Bankruptcy for 3 years.
Bankruptcy in England, Wales and Northern Ireland is different to Scotland.
In England, Wales and Northern Ireland you can visit your local court to enter Bankruptcy and the fee is £700. However in England, Wales and Northern Ireland, if your debt is below £15,000 you can enter a Debt Relief Order (DRO) which costs you £90.
In Scotland, you can enter Bankruptcy in a number of ways. The most popular are the Low Income Low Asset (LILA) where if you are on a low income, or in receipt of some benefits, you can enter this route to go Bankrupt. This costs £200 in administration fees with the Accountant In Bankruptcy. You cannot enter a LILA if you own your own house. The other route to go Bankrupt in Scotland is called a Certificate of Sequestration.
Bankruptcy lasts for 1 year, however If it's decided that you have an affordable level of disposable income and can contribute towards your debt, then you will be asked to pay this for 3 years. This is called an Income Payment Order.
If you would like help and advice with your Bankruptcy please telephone our debt helpline on 0800 085 0226. Our friendly advice team are qualified in the bankruptcy process and can provide free of charge bankruptcy support.
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