Applying for bankruptcy is a legitimate option if you have no other way to pay back your debts.
You can be declared bankrupt by the High Court after it has been presented with a “bankruptcy petition” either by the debtor (yourself), a creditor (someone you owe money to) or by the supervisor of, or a person bound by, an individual voluntary agreement.
You can file for bankruptcy yourself but be warned – applying entails a £680 fee. That’s the bad part. The good part is that you can do it online. After you’ve applied and if the adjudicator decides to issue a bankruptcy order, you will officially be declared bankrupt. At this point, your bank or building society account(s) will generally be frozen instantly. Everything you own (your property and money) now comes under the control of the official receiver.
You can expect a call within 2 weeks of this from the receiver for an interview. Usually, a discussion about the distribution of your money and property will ensue. Try to cooperate with them as best you can.
Since you won’t have any other assets, we’d advise you to open up a new bank account where you can receive any new payments. You’ll also be using this one to pay your bills since your old one(s) will be frozen.
Another good thing about all this is that it’s over after a year. If you cooperate with the official receiver, you can expect to be “discharged” from bankruptcy after one year. Plus, after you’ve been declared bankrupt, you won’t have to deal with creditors any more.
Some warnings, though. You might be expected (depending on your income) to make payments towards your debts for the next 3 years after filing for bankruptcy. Bankruptcy also affects your credit rating for the next 6 years. Depending on the amount of money you owe and how much your home is worth after any amounts secured on it are repaid, there might be a chance your home will have to be sold.
Some other things people tend to overlook is that you’re not completely “left out on the street”, though. You’re allowed to keep certain “exempt goods” as long as they aren’t worth more than £2,000 altogether. This may include any living or work essentials such as your car or household items. You also get to keep a reasonable amount from your income to live on. And perhaps most importantly, you can forget about the debts you had that bankruptcy covers!
The next question to ask yourself is if and how you can recover any debts you might have incurred and whether filing for bankruptcy is the best option for you. Depending on the amount of debt you need to recover, turning to a trusted legal firm such as MJW Law that has extensive experience in debt recovery might just be what you need to help your financial recovery.
And bear in mind, bankruptcy isn’t the end of the world. It isn’t permanent and it might give you the chance for a fresh start!