What Happens if You Declare bankruptcy
by Lucky Ali ·
Bankruptcy could be a methodology of handling and clearing your debts. However, it ought to solely be thought-about as one thing of a final resort because of its severe consequences. If you can’t pay back your debts and you have got exhausted all alternative choices receptive you – like debt relief orders or individual voluntary arrangements (IVA) – solely then must you think about beginning bankruptcy proceedings.
You can either declare bankruptcy yourself or, as an alternative, somebody that you simply owe cash to (a creditor) might produce a petition to create you bankrupt. Creating yourself bankrupt isn’t free, it’ll price £680 to hide court prices and a fee for the Official Receiver – the individual United Nations agency can handle your assets, cash and creditors. A soul to whom you owe a minimum of £5,000 will apply to create you bankrupt, albeit you don’t comply with it.
Once you’ve been created bankrupt, you’ve got handy over your finances and assets to the Official Receiver to manage. They’re going to dump assets to pay your debt, freeze your checking account and take hold of all bank cards, credit cards and cheque books. Your bank can decide whether or not you’re allowed to continue mistreatment accounts once bankrupt.
General disadvantages to changing into bankrupt include:
- You may have to sell your home.
- You may have to sell off belongings, particularly any that are of a high value or deemed ‘luxury’ items.
- It will be hard to get credit when bankrupt and your credit rating will be negatively affected for 6 years.
- Generally, bankruptcy ends after a year, at which point your debts are written off.
- You can keep some belongings which you need, including household items, belongings needed for work and a reasonable amount of money to live off.
- You can reduce the stress and pressure of creditors pursuing you for money – the Official Receiver will now deal with this.
- After declaring bankruptcy, creditors have to stop most kinds of court action for regaining their money.
For example, you are allowed to keep:
- Most personal household items, such as furniture.
- Motor vehicles you use as your primarily means of transport up to the threshold value, excluding any finance owing on them .
- Tools you use to earn an income up to the threshold value.
- Assets held on trust, such as a family trust or child’s bank account.
- Any compensation you received from a personal injury claim, as well as any assets you bought with that compensation.
- life insurance policies (yours and your spouse’s), along with any proceeds you received from these policies after you were declared bankrupt.
- Awards with sentimental value, such as sporting and cultural medals and trophies.
- Most regulated superannuation fund balances and payments you received on or after the date you were declared bankrupt.
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