Pros & Cons of Bankruptcy

Sometimes bankruptcy can seem like your only option out of debt, but there are many long term implications which need to be considered before you make your final decision. Please call 0808 131 9100 to speak to one of our expert advisors to see how we can help you.  

Pros of Bankruptcy:

• All your debts are written off, and you should become debt free within 12 months.
  (However you may still end up making payments into the bankruptcy estate for an additional three years through a binding Income Payments Order issued by the Court, even though your bankruptcy order will have legally finished after the 12 month period.)
• Once the bankruptcy order has been made it will put an end to creditors’ phone calls and letters, as it is all dealt with by a third party.
• If you live in rented accommodation and have kept up with payments, then you can continue to live there and pay rent.

Cons of Bankruptcy:

• Once you have declared yourself bankrupt, any assets will be sold to repay your creditors and your financial life will be subject to scrutiny.
• All your assets will be sold to your creditors, this includes your home and possibly your car. Only those which are required for a basic standard of living will remain.
• Disposable income will automatically be paid to your creditors.
• If you live in rented accommodation and are behind on your rent, then your landlord can commence a possession action on the property.
• It may hinder your future career prospects. For example, bankrupts cannot become company directors and a number of professions including the Post Office and Police Force will not employ bankrupts for some jobs. It is advised that you refer closely to your contract of employment.
• If you wish to gain credit in excess of £500 then you must declare that you have been made bankrupt.
• The bankruptcy order will seriously effect your credit rating, and remains on your credit file for six years.
• Bankruptcy details will be published in your local paper and can be viewed online.
• Certain debts cannot be written off, such as fines, child support, student loans and fraud.

There are also other options to be considered before bankruptcy, these include IVA or Debt Management Plans. Please call our expert advisors on our free phone number, 0808 131 9100 or leave your contact details in the Quick Enquiry Form.

Entering into an IVA may adversely affect your credit rating for up to six years from the date of approval.

Your property will be protected within an IVA but you may be required to release all or part of any equity during the period of the arrangement.

Failure to complete the term of an IVA can result in bankruptcy.

(In Scotland, a PTD is the equivalent to an IVA.)