If you have literally no money to pay back to your lenders and are in a really difficult situation to keep up with your commitments then bankruptcy might be one of the options that you need to explore.
Bankruptcy should only be considered when all other debt solutions have been looked into, especially an Individual Voluntary Arrangement (IVA). An IVA was introduced by the Government in 1986 as alternative to Bankruptcy.
What is bankruptcy?
Bankruptcy is a form of insolvency. If you are made bankrupt:
You no longer have to deal with the lenders you owe money to - an official receiver will take control of all of your money and assets, dealing with your lenders for you.
Assets that you own could be sold and used towards paying your debts off, these assets are normal things such as your vehicle or house.
Almost all types of debt are wiped off after you have been discharged from bankruptcy which is normally after one year.
Going bankrupt involves going to court. It could cost you up to £705, or more if you choose to use a solicitor. Your name and bankruptcy details will be published on the national register of bankruptcies, called the Individual Insolvency Register.
Please note: Bankruptcy should always be considered as a final resort due to the implications involved. For example, you could lose your home if you are a homeowner, your valuable goods will be sold to repay your lenders and you will find it hard to secure credit in the future. It could also affect your working life, for example if you own a business, you could be asked to close it down to help repay your lenders. Also, you may not be allowed to work within the financial sector or in certain public offices.
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All debt solutions should be very carefully considered. i.e if you enter into an Individual Voluntary Arrangement (IVA) or Debt Management Plan, then fees will apply and these are made clear by your advisor or in the documentation that you receive. By entering into a debt solution may place you further into arrears. You have the right to a cooling off period of 14 days.
Disclaimer: Results may vary from person to person so please speak to an advisor who will go through all of your options.
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