Bankruptcy to Cut Bad Debts
For some people, probably the only way out of their financial predicament is to go into bankruptcy. But, bankruptcy can have a heavy impact upon your life, and can come at a high price. Loss of your job in a minority of cases, your personal information is listed on the Insolvency Register, and a public local announcement of your bankruptcy can be made, though not in all cases. The stigma of going bankrupt can affect some emotionally, too. On the other hand, as a way to cut bad debts and make a fresh start this could be the solution in certain circumstances. Bankruptcy proceedings will also make sure your assets are shared out fairly among your creditors.
Anyone can go bankrupt, including individual members of a partnership. What are the implications of bankruptcy? Although there is quite a long list of negatives involving things you will not be able to do when bankrupt, the chances are that not all will not have too much impact on your life. Practicing as a lawyer, or Chartered Accountant, acting as a Justice of the peace or becoming a member of parliament might not be too high on your list of things you would like to do. On the other hand, you do lose control of your assets, and your credit is shot to pieces for a while. Getting any credit after bankruptcy is completed can be very difficult, though there are ways it can be done.
What You Need To Know About Bankruptcy
There is a financial cost to applying for bankruptcy, currently around £700, though someone with earnings below a certain level may pay less as the court fees of £175 are waived. You could lose your home, your business, and some assets may be sold. Getting a bank account can be difficult if not impossible for a bankrupt. Also, not every debt can be cancelled, court fines and student loans for instance.
But, on the positive side of things, freedom from debt could happen as early as one year later (or sometimes even less), with a possible automatic discharge. Relative peace of mind may be worth it, but remember it does come at a price particularly in emotional terms.
To declare yourself bankrupt you start the process by filing a Bankruptcy Petition, which becomes the Debtor’s Petition at your nearest county court that deals with bankruptcy hearings. Once your petition is filed, an Insolvency Practitioner is appointed as Official Receiver, who will be the one doing the fact finding about your financial affairs. Do not think that bankruptcy is the only option available to those in debt. There is a government website dealing with bankruptcy and other ways to cut bad debts.
In the US there are various “chapters” of bankruptcies, having different rules and implications. A uniform bankruptcy federal law in the USA governs all bankruptcy cases whatever the State.
Bankruptcy is not to be taken lightly, but for some it is the best solution to help cut bad debts.
As far as pensions are concerned there appears to be a lot uncertainty about how bankruptcy affects someone’s pension. Are pensions taken into account by the trustee, will you need to hand over any part of your pension etc? This is a complex area, and one in which there was a change in rules in 2000. To check the rules for bankruptcy orders which came into effect after 29th May 2000 you should see the government’s latest guidance on pensions & bankruptcy.