What Are The Negatives
Aside from what’s we’ve already mentioned, like your possessions being taken from you, being bankrupt puts a number of restrictions on you – like not being able to borrow more than Â£500 without telling the lender about your bankruptcy.
The fact that you’ve been declared bankrupt will also stay on your credit reference file – affecting your credit rating – for six years.
If you work in certain professions like the legal or financial industry, it’s also possible you’ll lose your job. And if you own a business, it might be sold off to cover your debts.
Your bankruptcy will also be published publicly on an insolvency register for 12 months, although there can be exemptions for people who are at risk of violence.
If You Dont Live In England Or Wales
You can declare yourself bankrupt in England or Wales if you live outside the UK, provided you lived in England or Wales or have had a business there at some point in the last three years. The Bankruptcy Order made in England and Wales may not be recognised in other countries outside the UK.
Disclosing Bankruptcy After Being Discharged
If you are being asked the question Have you ever been declared bankrupt? then you will need to answer the question truthfully. Some forms have a declaration at the end which you must sign to state the information you provided is accurate. If you have any questions about why this information is deemed necessary, you should ask the company asking the question. You may also be able to;decline to answer the question.
Please note, your bankruptcy may no longer be showing on the Insolvency Register. Unless restrictions were placed or an error has occurred. It could be that the Bankruptcy could still be traced by contacting the Insolvency Service. Or by checking the London Gazette or local press records. Therefore it is always important to be truthful on any application.
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Why Should I Consider Bankruptcy
Apart from giving you a fresh start by writing off your outstanding debts, there are other benefits for declaring bankruptcy.;
You will be relieved from the pressure asserted by creditors as they are barred from taking further actions to recover the debt.;
Moreover, being bankrupt doesnt mean youll lose everything. In fact, youre allowed to keep exempt goods. These include:
- basic household items
- items and machinery necessary for your business or employment;
- your car if its essential for you to get to work or to satisfy your domestic needs
Youre also allowed to keep a reasonable amount of money for personal use .;
Where you have been asked to make payments to creditors with your income , it cant last for more than 3 years.;
However, bankruptcy can affect your credit rating and will remain on your credit history for 6 years. As such, it may not be suitable for people that dont want their financial issues to be public knowledge.;
You will also be subject to certain restrictions during the bankruptcy period.;
What Are The Benefits Of Bankruptcy
The most obvious benefit of bankruptcy is the way in whichit could eliminate the debts you simply cannot afford to repay. No morereminders or threatening phone calls, no more demands by post and knocks at thedoor. Your slate is effectively wiped clean and you are given a fresh start.
In some instances, bankruptcy is the only option. Inothers, it is a preferable option to the alternatives available. For example,if you find yourself drowning in debt but have very few assets of value ;i.e. you dont own your own car or home,bankruptcy could improve your situation.
The severity of your situation and the combined value ofthe assets you own will determine whether or not bankruptcy is an appropriateoption.
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Opening A Current Account After Bankruptcy
So, what can you do if you need a current account after bankruptcy? You have two main options:
- A basic bank account. These are mostly offered by traditional high street banks, so they are probably a better option if you like banking in person and speaking to someone in real life for customer service.
- Bank accounts with no credit checks. Some digital-only banks do not run credit checks when you apply for a bank account, so you are much more likely to get accepted after bankruptcy. This is a better solution for people who like managing their account on their phone.
Basic bank accounts
Most high street banks offer basic bank accounts. They are current accounts that allow you to do all essential banking operations: you will be able to receive a salary, make transfers and get a debit card to pay for things in shops and online.
However, dont expect a basic bank account to be the same as a full one. You most certainly will not get an overdraft facility, for example: your credit score will be very low after bankruptcy and your bank will deem it too risky to lend you money. Learn more about and check your credit score here.
You usually wont get a cheque book either, and your daily ATM withdrawal limit might be lower than with a standard account.
Bank accounts with no credit checks
Most digital-only banks will not check your credit report when you apply for a standard current account with them , at least not until you separately apply for an overdraft with them.
Who Can Be Made Bankrupt
A bankruptcy order can be made for one of three reasons:
- you cant pay what you owe and want to declare yourself bankrupt
- your creditors apply to make you bankrupt because you owe them £5000 or more
- an insolvency practitioner makes you bankrupt because youve broken the terms of an individual voluntary arrangement
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Undischarged Vs Discharged Bankruptcy
For the first year after you declare it, your bankruptcy will be undischarged. This basically means that all your assets, including new ones you may come into possession of during this period, will be managed by the receiver and used towards compensating your creditors .
After a year, your bankruptcy will be discharged. Three months after your bankruptcy is discharged, your name also gets removed from the Insolvency Register.
Once your bankruptcy is discharged, it will be easier to find a bank willing to let you open an account. However, bankruptcy stays on your credit report for six years and most banks run a credit check when you apply for a current account. So while discharged bankruptcy generally makes things easier, it will not entirely solve your problems in terms of opening a new bank account.
Can Creditors Contact Me After Bankruptcy
Some creditors do have the right to contact you after filing for bankruptcy. Not all debts are covered by bankruptcy. In those instances, the creditors are permitted to chase you for payment. These types of debt include:
- Secured debts, e.g. mortgages
- Debts where a bailiff obtained a walking possession order or controlled goods agreement before your bankruptcy came into effect.
- Magistrates court fines
- Court ordered payments under a confiscation order
- Debts to HM Revenue and Customs
- Council tax arrears where your local authority took out a council tax liability order before your bankruptcy took effect
- Rent arrears. Although your landlord cannot force you to pay these, you can be evicted if you dont.
If you are being chased for any of these debts and youd like to agree a payment arrangement, youll have to contact them directly to sort this out.
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Bankruptcy: What Happens When You Go Bankrupt
It’s affected 50 Cent, Fazer from N-Dubz, Kerry Katona and pretty much all of the band Blue – among a lot of other celebrities.
But when we talk about bankruptcy, how many of us actually understand what it means?
Katie Price is the latest celeb to be declared bankrupt after failing to stick to a plan to repay her debts.
And after reading this, you’ll know exactly what that means.
Apply For A Basic Bank Account
A basic bank account is exactly what it sounds like. You wont get a cheque book or overdraft facility, but you will be able to get wages, benefits, pensions, etc. paid into it.
You can also withdraw cash from Post Offices and cash machines and set up direct debits and standing orders, as well as pay money in, withdraw money and check your bank balance at the bank counter.
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Can You Get A Business Bank Account After Declaring Bankruptcy
Most traditional banks will carry out a credit check when you apply for a business bank account. Thats even if your business is registered as a limited company and is thus separate from your finances: theyll check you as a director.
If you have recently had a bankruptcy, it will appear on your credit file and your application might be refused.
Exceptions To Payment Rules
There are some exceptions to the payment rules. You can make direct payments for:
- secured creditors, like a mortgage lender
- debts which are not included in the bankruptcy , these are called non-provable debts
- money owed after 19 March 2012 to the Department for Work and Pensions for budgeting or crisis loans
You must keep paying rent and any new debts after the bankruptcy. You may not need to pay bills that are unpaid at the date of your bankruptcy order. You may have to pay a deposit for future supplies of gas, electricity or other utilities. Or your utility accounts may be transferred to a spouse or partner.
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What Can I Do To Avoid Bankruptcy
Bankruptcy is a last resort option that should be avoided at all costs. Even in instances when debt becomes problematic, there are avenues to explore for preventing bankruptcy becoming necessary.
Examples of which include the following:
Rather than waiting for things to hit a crisis point, it isfar better to come clean and discuss your issues with your creditors.Bankruptcy could result in serious losses on their part should your debts bewritten off entirely without recovery.;It is therefore in their best interests to help devise a mutuallyamicable plan that benefits both parties.
- Consider a consolidation loan
One popular and accessible alternative to bankruptcy is a consolidation loan. This is where one large loan is taken out to repay most or all of your debts, which are subsequently replaced with one affordable monthly payment. Along with reducing the amount you are required to pay each month, a consolidation loan can also significantly reduce the overall size of your debt.
- Prioritise your debts
Some debts should always take priority over others, such asmortgage payments, monthly rent payments, council tax payments and utilitybills. This is because the consequences of non-payment can be far more seriousthan defaulting on a mobile phone debt, for example.
- Seek independent advice
What Happens When You Declare Bankruptcy
This solution isnt one that will impact you and your credit rating forever and so it may be an effective way of clearing your debts and giving yourself a fresh start. However, its important you understand what happens when you declare bankruptcy and to prepare accordingly.
Can I Open A New Bank Account After Going Bankrupt
You will not be alone in creating a new bank account. In fact, 150,000 people will become insolvent this year and almost all of them will need a new bank account. If you decide to open a bank account, this would depend on the bank rules and agreement, because some banks will allow a second chance to a person who went to bankrupt, while others wont.
When you do create a new bank account, it is important that you always when completing any forms. You must be absolutely truthful on your bankruptcy forms as you will swear to them and could be found guilty of perjury. Bankruptcy is a matter of public record, advertised in local newspapers and on the internet. Therefore it is almost certain that any bank you try to bank with in the future will find out about your situation.
When Your Bankruptcy Will End
You will be freed from bankruptcy after 12 months. This ends the bankruptcy restrictions and releases you from most of the debts you had when the bankruptcy order was made.
Youll normally be discharged automatically, even if:
- no payments have been made to your creditors
- youre still paying an IPA or IPO
- some assets havent been sold yet
Assets you had during bankruptcy can still be used to pay your debts once your bankruptcy has ended.
Your bankruptcy can be extended for longer than 12 months if you dont co-operate with your trustee. Check your discharge date using the Individual Insolvency Register on our website. If your discharge status is suspended indefinitely you need to contact the official receiver for an update.
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Could You Cut Your Debt With A Credit Card
If your debts are spread over several credit cards, you may be able to reduce your debt more quickly by shuffling balances from one card to another.
Read our guide to find out how you can do this with your existing cards:;What is a balance transfer?.
Alternatively, you could transfer your debts onto a balance transfer credit card or a lifetime balance transfer card. Read our guide,;What is a balance transfer?, to work out which suits you best.
Any Other Assets You Have Are Also Sold
As well as your home, any considerable assets are also sold to make repayments to your creditors. This means items of worth, such as your car, will need to be added to the bankruptcy to be sold.
If you own your vehicle, you may only be able to keep hold of it if its considered essential to your day to day life or if its worth very little.
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Do I Have To Declare Bankruptcy After 6 Years
After you are discharged from bankruptcy there is no legislation saying you have to declare this in the future. You are however legally obliged to disclose your bankruptcy if directly asked. Especially if you want to work in the financial or legal sector .
Professional membership or licence may have a requirement to prove you are a fit and proper person. There may be a question about bankruptcy within the application. It could appear on an application for credit and may simply ask have you ever been subject to bankruptcy.
What Happens To Your Business
If youre self-employed, your business will be closed. Any business assets will be claimed by the trustee.
Your employees may make a claim for unpaid wages and holiday pay, payment in place of notice, and redundancy. Theyll make this claim to the National Insurance Fund, or the money may be claimed in the bankruptcy process.
You can start trading again, but youll have to follow certain rules.
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What About Borrowing Money
Restrictions are imposed on borrowing whilst you are bankrupt and any further borrowing that is approved will require you to tell any potential lender about your bankruptcy. Once you have been discharged, you will no longer have to declare your bankruptcy unless you are asked some credit applications, for example, specifically request this.
Your bankruptcy will be recorded on your credit report for six years from the date it starts, so this can make it more difficult to borrow money and you may be subject to higher rates of interest.
Bankruptcy may also have an impact on tenancy agreements and other contracts, such as satellite TV subscriptions and mobile phone contracts.
If you have any more questions about bankruptcy, speak to an advisor and theyll be able to help you further.
Bankruptcy Pros And Cons
Just like the rest of the debt solutions, declaring bankruptcy has its own pros and cons. Weighing out its benefits against costs can help you determine whether it is the right option for you.
Advantages of Bankruptcy: Depending on your financial situation and amount of debt, declaring bankruptcy can be a blessing for you. Here are some of the advantages of going bankrupt:
Waived Debts: Going bankrupt will reduce your debt load since all the unsecured loans you have defaulted on can usually be written off.
Protection Against Legal Action Once you secure a bankruptcy order, your insolvency is formally acknowledged. This offers a measure of protection against creditors since they can no longer take any legal action against you to recover the money you owe.
No Additional ChargesDeclaring bankruptcy will also stop any additional fees and penalties. This means that your creditors cannot apply further charges and interest payments on you.
Reduced PressureAfter you declare bankruptcy, you will not have to maintain contact with your creditors, and you will stop hearing from them.
Disadvantages of BankruptcyThe decision to declare bankruptcy should be well-thought-out because it can have serious implications on your life. Here are some of the risks associated with going bankrupt:
Asset LiquidationAssets such as your home or car might have to be liquidated and sold off in order to pay your creditors.
You could write Off Your Unaffordable Debt
You could avoid bankruptcy
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