Declaring Bankruptcy UK : Clear Your Unsecured Debt
One of the major debt problems often faced by the people of the UK is getting bankrupt. If you owe more than £5,000 to creditors, then they have the freedom to take the help of court and make you bankrupt, with or without your consent. Thus, if you are struggling hard mostly with your unsecured debts, bankruptcy can be one of the most probable solutions to repay your debts. Although the only individual can apply for bankruptcy, no company or partners can go for it.
Bankruptcy is another form of insolvency that is designed in a way to write off the debts which the debtors failed to afford to repay. Since the debts are written off, the individual has the opportunity to start afresh in a debt-free situation.
Bankruptcy is a legal insolvency process that writes off the debts, which can’t be repaid and distributes your assets among your creditors. While you choose to go for bankruptcy through insolvency service, you need to keep in mind that there can be certain consequences as well. At the time you are struggling with your debt problems, either you can voluntarily choose bankruptcy UK, or your creditors can bankrupt you.
Bankruptcy is the preferred way of getting debt free often by selling of assets, for the citizens of England, Northern Ireland and Wales. Although, Scotland doesn’t offer the provision of bankruptcy. Rather they have sequestration, an alternative to bankruptcy.
Citizen Debt Help has a team of a highly experienced financial advisor who will guide you thoroughly for the whole process of bankruptcy. This section explains the method of bankruptcy and whether it can be the best-suited option for you to clear debts.
Once you have voluntarily declared yourself bankrupt or you have been declared so by the creditors, the creditors can no longer contact you directly. Thereafter, there will be no direct interaction between the debtors and creditors. Nor can the creditors have the freedom to take any further legal action against you.
Gradually, it becomes the responsibility of the trustee to deal with the creditors and also to manage your assets to clear debts. The trustee is usually the officer appointed by the bankruptcy court or the insolvency practitioner. Usually, an accountant or a lawyer takes up the responsibility of the debt specialist who acts as the insolvency practitioner.
The process of Declaring Bankruptcy in UK
Once you have declared bankruptcy in the UK, the unsecured debts which have then become unmanageable by you will gradually be waived off. Based on the exact location in the UK, where you stay, the provisions of bankruptcy may get implemented differently to deal with your debt problems.
You need to get proper bankruptcy advice before you apply for the same. Bankruptcy can either be declared be you or your creditors may file a bankruptcy petition against you at the court. To voluntarily declare yourself bankrupt, you need to get the guidance from the bankruptcy advisor. Then you can apply for bankruptcy. Then the Insolvency Service’s Adjudicator will scrutinize your application to verify whether you can be considered as ‘insolvent’.
You have to make a payment of £680 to make your application. You will only get your application approved if you have assets and you are unable to pay the unmanageable amount of the loan. Thus, if it gets approved, you will get declared as bankrupt and will receive an order for the same. Then you can follow the process accordingly to get a debt-free life.
Bankruptcy is a legal proceeding of insolvency that involves a singular entity be it a person or a business. The individual is unable to repay their debts and thus use their non-essential assets or extra income to solve their debt problems arising out of an outstanding amount of debt. The procedure of bankruptcy usually starts with the filing of a petition. It can either be filed by a debtor or by the creditor against the debtor. Then the debtors’ assets are evaluated as they may be used to clear debt off and then the person is declared bankrupt. The status of bankruptcy usually lasts for a year.
The working procedure of bankruptcy may vary from place to place in the UK. But you can only for bankrupt when most of the debts you owe to various creditors have been written off. Thus, bankruptcy is often considered as the form of insolvency, declared at a time when the debtors reasonably fail to pay off the unsecured debts. Under such a scenario, often their assets could be used as bankruptcy mortgaged. Once the phase of bankruptcy is over, the person is usually debt-free and can have a fresh start.
When the total amount of mostly unsecured debts surpass the total value of the assets a debtor owns, then only bankruptcy seems apt. Under such circumstances, the debtor feels that repayment won’t be possible or it may take an enormous amount of time. Thus at that point, bankruptcy can be the most preferred way to clear the debt.
- Debts being waived off: After the period of bankruptcy is over, the number of unsecured debts the person has defaulted on will be written off. Thus, bankruptcy is a way to reduce the amount of debt to be repaid.
- Administrator guidance: Once the bankruptcy order gets approved, an administrator will be appointed for you. He/she will be responsible for dealing with your creditors and ensure your repayment to them. Thus, the administrator will design the repayment to make debt free in the easiest possible way.
- Relief from the creditors: Since the administrator will take the charge on your end, you don’t have to interact with the editors directly. The creditors will not even have the freedom to contact you directly. They won’t even be able to take any legal actions against you with the help pf the court.
- Zero additional charges: Once declared bankrupt, no creditors can impose any sort of additional charges on the debt.
- Debt-free in a year: Once the period of repayment under the bankruptcy is over, you can start a debt-free life.
Just like other insolvency procedures, there are certain risks involved with bankruptcy mortgage as well. Some of the most probable risks that could be there if you choose to go bankrupt to solve debt problem are:-
- The property could be at stake: If you own a property with equity there is always a chance that your share will be released to repay the debts to your creditors. In fact, to only they may get into bankruptcy mortgage but they can even be sold off. Although, if the property has minimal or zero equity related to it, the chances of them being at risk is very less. But even if your home has equity involved and assets considered under ‘exempt goods’, it may get sold.
- Tenancy and employment risk: In case you live in a rented home, the landlord may choose to end your tenancy if you declare bankruptcy. It may even happen if you get into bankruptcy mortgage with your other assets. In fact, a few landlords may even refuse to allow tenants who have been declared bankrupt. If you own a business, that could be even sold making your employees redundant. A few companies may even refuse to hire people who’ve gone bankrupt. Moreover, a bankrupt individual can’t get into any managerial high-profile job of any company.
- Financial record available publicly: The details of your bankruptcy will be available on an Insolvency Register which is publicly available. In Northern Ireland, the name of a bankrupt person even gets published in a newspaper.
- Impact on credit rating: Your credit file will have the record of your bankruptcy for the next six years. Thus, there is always a chance that any creditor may refuse to lend you money in future. This may happen because having a record of bankruptcy negatively impact your credit ratings. Moreover, bankruptcy restriction may extend up to 15 years and during this time, there is always a chance that your financial status may get affected.
- Post bankruptcy scrutiny and affected immigration: Even after the phase of repayment under bankruptcy is over, your administrator may continue to scrutinize your financial status. And the worst could be your immigration status may get affected.
- Not all debts covered: It can’t waive off several debts like
- Many student loan debt Court-ordered alimony
- Court-ordered child support
- Reaffirmed debt
- Government fines or penalties
- Court fines and penalties
Whether bankruptcy is the right solution for you to deal with your debt problems or not, can only be decided after a thorough analysis of your current financial situation. Although, finical advisors mostly go for the bankruptcy advice when no other options seem convenient to make the repayment of your debt. Thus, before you declare yourself bankrupt, you need to figure out whether it is the right option for you or not.
Getting bankrupt may affect your daily life in multiple ways, thus you need to consider various issues before opting for bankruptcy mortgage. It has several long term implications on your credit life. Thus, it is only advised to go for it under the following circumstances:
- There is no other way left through which you can clear your unsecured debts
- You don’t owe many valuable assets including car, house or other properties
- The summation of the values of all your assets should be comparable to the amount of debt you owe.
- There is hardly any chance that your financial circumstances may get better in future
- For declaring business bankruptcy, you have to own a business in England, Wales or Northern Ireland.
- Often, you may need to pay a certain amount from your monthly income. Then you should be able to pay the monthly amount needed to continue the repayment procedure of your debt under bankruptcy from your income.
Thus, you should always consult an expert financial advisor to understand whether to go for it and get your bankruptcy advice if you chose to go for it.
Before you could declare yourself bankrupt, you need to go through a formal process. Be it a business bankruptcy or a personal one, these steps need to be followed:
1. Making the right choice
Although bankruptcy may help you start afresh a debt-free life, there are many drawbacks as well. You need to analyse all your financial commitments and your present circumstances with the help of a financial advisor. Once you are confident that it is the best possible way to clear debts, then only opt for declaring bankruptcy and apply accordingly.
2. Complete the application and make the payment
You can apply for the bankruptcy through the bankruptcy govt official portal of the UK. Either you can fill out the form or take the guidance of the financial advisor for filling it out. To complete the application process, you need to make a payment of £680.
Once you have submitted the application, this fee is non-refundable. You can either make the payment of application fees at one go or you can opt for installment payments. But to complete the application, a minimum of £5 needs to pay. You can either make the payment online or pay at the bank.
3. Have enough backup money for daily expenses
There can be a time gap of a few days between the day your bankruptcy order being passed and the day the appointed receiver takes the control. Although, before the receiver gets to his job, there is a chance that your bank accounts may be frozen immediately. Once, your account is frozen, you won’t be able to go for the transaction of money. Thus, before it gets frozen, you should have sufficient money withdrawn for your expenses.
4. Submitting the application
Check thoroughly the statements that have been mentioned in the application. Once you are confident enough to go, submit the application. In case, there is any discrepancy in the declaration of your property in the application, you could be convicted under criminal offence.
5. The decision of the adjudicator
After the submission of your application, the adjudicator will scrutinize your application. Within 28 days, the result will be declared and you will get to know whether the application has been accepted or rejected.
In case, they feel some additional information is required, they may get in touch with you. Under such a situation, it may take 14 more days to declare the result. In case it gets rejected, you can ask for a review. Even if they reject it after the review process, you can seek help from the court.
6. Bankruptcy order passed
Once your application is approved, you can be officially declared as bankrupt. Then, all your accounts related to your bank or building society will be frozen.
7. The official receiver takes the charge
Within two weeks of approval, the official receiver will get in touch with you. You will have a telephonic conversation with the receiver before they take the charge of your money and property and co-ordinate accordingly with the creditors.
8. Create a bank account
A separate ban account is created where you can deposit your earnings for your daily expenses. Although, in some cases, you may be allowed to use the existing ones.
9. Debt Free in a year
If the process runs smooth and without any hindrance from creditors, you will be free from bankruptcy in a year and will enjoy a debt-free.
Bankruptcy UK can only be chosen as a way to solve debt problems when the situation is beyond control. When you feel you can’t repay your debt at any feasible way within the given time frame, then only you can go for bankruptcy register. Although, to qualify for this form of insolvency, you need to own certain assets or properties, that could be sold to repay your debts. The value of that assets should be at par with your debt amount.
Although, bankruptcy ensures that all your individual unsecured debts be it for a person or a business are written off, but it has some restrictions as well. So, until and unless, you are well aware of the restrictions that could be imposed on you, you should not go for it just to clear debts.
You can avail free debt advice from our highly experienced team of financial advisors. They will help you figure out whether bankruptcy will be the best option to solve your debt problems or not. We will analyse your financial status and help you decide. We even help you work on your budget.
Once, you get the confidence for it, we will help you make the application for the bankruptcy UK.