Bankruptcy is a legally binding debt solution that’s often used as a last resort if you cannot repay your debts in a reasonable amount of time.

Bankruptcy is available to those living in England, Wales, and Northern Ireland. It is a formal insolvency process whereby your debts are written off. You can apply for bankruptcy if you owe a minimum of £5000 but will have to pay a fee of £680 when you apply through the high court.

You can put all your unsecured debts into your application for bankruptcy, including mortgages. However, you will have to surrender your home and possibly other valuable assets. Once you enter into bankruptcy, the companies you owe money to are no longer allowed to contact you or take further or legal action against you.

Bankruptcy typically lasts up to a year, and at the end, any remaining debt you have is written off. Your bankruptcy will be put on the public record, affecting your working opportunities and credit.

Bankruptcy Advice Scotland

You may have noticed that Scotland isn’t listed as one of the countries you can apply for bankruptcy in, as this is due to the terminology and rules being slightly different. In Scotland, bankruptcy is referred to as Sequestration, and you can find out more about how it works here.

How does Bankruptcy work?

Bankruptcy is a form of insolvency, where an individual knowingly has no way of meaningfully paying off debts they owe. Declaring bankruptcy is a simple process but is not something to be taken lightly. While it will help write off debts, it should never be viewed as a means to brush debt aside.

What effects does Bankruptcy have?

There’s an adage that bankruptcy helps “wipe the slate clean” and provides someone with the chance to start over. While it can help provide debt relief, it will come with heavier consequences than most other personal debt solutions. It should be taken seriously, and with the right attention to detail; something the team at Hillcrest Finance can help with.

The most obvious effect would be on credit. After declaring bankruptcy, you can expect your credit rate to plummet. You will also have trouble getting a credit card or get a loan within a respectable interest rate. Any record of bankruptcy has to be registered and appear publicly for six years.

Advantages of Bankruptcy

  • You no longer have to deal with creditors and communicate with them
  • Legal action can no longer be taken against you
  • You can keep enough money to live on as well as essential belongings
  • You can also keep a vehicle up to the value of £1000 or less if you need it for work purposes
  • You will be allowed to keep your home if it has little to no equity in it.

Disadvantages of Bankruptcy

Bankruptcy may not be a good option for some as :

  • You must pay a fee of £680 to apply for bankruptcy
  • Your bankruptcy will be put on public record for years
  • It is likely your home will be sold if it has a lot of equity in it
  • Some jobs are affected by bankruptcy. For example, you would no longer be able to work as a company director or be involved with the management of a limited company
  • If employed as such, you will no longer be able to practice as a solicitor, accountant or in financial services

Is it true you have to pay to declare Bankruptcy?

Yes. The fees to do so vary from region to region. Individuals in England & Wales would pay £680, while those in Northern Ireland pay £683. Again, if you’re in Scotland, you’d be looking for information on Sequestration.

Can I borrow money while bankrupt?

An individual can only borrow up to £500 for the year they are officially bankrupt. Anything more and they must officially declare their status with the creditor.

Will I have to give up my house and car if I’m bankrupt?

In most cases, if items are viewed as essential for daily life, they tend not to be placed on sale. This rule doesn’t apply to your home, additional property, or cars, which would be seen as items which are easy to sell and claim credit on.

What alternatives are there to Bankruptcy?

There are many alternatives to bankruptcy, including the likes of IVAs, Debt Relief Orders & Administration Orders. Knowing which works for your situation requires expert advice, which Hillcrest Finance can provide.

If you’d like to know more about how to declare bankruptcy or what alternatives to bankruptcy are available, call our advisors on 0141 478 0862. Lines are open weekdays from 8 am. You can also get in touch via WhatsApp at a time which suits you.

Get in touch with us about Bankruptcy today