Entering bankruptcy is a popular route in the UK to deal with debt problems. The protection from creditors and resolution to the debt problem can be an attractive option to become debt free again. As a debt advice charity, it’s our responsibility to ensure everybody we help is prepared for the debt solution they are about to enter. One question we’re asked often is, what happens if I go bankrupt?
For quick debt help you can call Debt Support Trust on 0800 085 0226. You can also get more bankruptcy advice on our advice pages.
Becoming Bankrupt – What Happens to Me?
Bankruptcy lasts for one year and at the end of the year any remaining debt is written off and you are not legally required to pay the money back. This is true for bankruptcy across the UK. However, the implications of entering bankruptcy will vary from person to person. As a result, we’ve summarised some of the vital points you will want to consider before entering bankruptcy.
Your Job in a Bankruptcy
Before applying for your bankruptcy it’s worth checking whether you are in employment. There are two reasons for this. The first is your contract of employment. Some employers don’t allow employees to work for the company if they are an undischarged bankrupt or if they were made bankrupt in the last 6 years. This is often true for the financial services world. You should speak to your HR manager or check your contract of employment to be sure.
Secondly, in bankruptcy you can be asked to make a contribution towards your bankruptcy on a monthly basis. The amount you have to pay is determined by your bankruptcy supervisor. While bankruptcy lasts for 1 year, the payment order will last for 3 years. If you are working then another debt solution may be more applicable to you.
If you need help understanding the debt solutions available to you, or what happens if you go bankrupt, please call our debt advisors on 0800 085 0226 for confidential debt help.
Bank account in Bankruptcy
After entering bankruptcy your creditors are notified and all of your accounts where the company is owed money will be frozen. So, for example, if you owe a bank money on a credit card then they would freeze all of your bank accounts, even your accounts which are in good standing, such as an overdraft account.
This means that prior to entering a bankruptcy you will need to apply for a new bank account, with a bank you don’t owe money to, and transfer your income and direct debits. You can’t open a bank account with a sister company of another bank you owe money to.
For help with your bank account and what will happen in bankruptcy to your bank accounts, please call 0800 085 0226.
Bankrupt: what about my credit file?
A bankruptcy will last on your credit file for 6 years and at the end of the period it will be removed. The default added will mean applying for credit will be difficult. During the period of the bankruptcy you should not apply for credit, however thereafter any application for finance will likely have a high interest repayment rate.
What Happens to my house in bankruptcy?
Your assets will be reviewed under bankruptcy. This includes your house, car and other assets like stocks, shares or bonds. If your asset has a realisable value then you could be asked to sell this for your creditors.
If you live in a mortgaged property which has equity after selling the property, then your bankruptcy supervisor will proceed to sell your property. They will take selling costs, fees and charges into account too.
If your assets do not have any realisable value then you will be allowed to keep these.
Get Bankruptcy Advice
Entering bankruptcy to resolve a debt solution is an important step. Before deciding to proceed with bankruptcy it’s often advisable to speak to a debt expert to get their opinion. This means you can be sure you’re making the right decision and be fully aware of what bankruptcy will mean for you.
You can call Debt Support Trust on 0800 085 0226 – our advisers are friendly and experienced. Alternatively, to get an idea about which debt solution you could be applicable for, you can complete our debt test.