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What are the Pros & Cons of Bankruptcy?
The idea of getting rid of your debts by going bankrupt may seem appealing to some. However, whilst there are undoubtedly some benefits to this, there are of course some very serious factors that must be considered before you take such a big decision. To help you see what these are in relation to bankruptcy, we have compiled a shortlist of some of the biggest pros and cons to declaring bankruptcy to help you get a better idea as to what is involved and how it will affect you.
Bankruptcy – The Pros
- Helps to eliminate the uncertainty and stresses associated with having to deal individually with multiple creditors
- Once your Bankruptcy Order has been approved, an appointed administrator will take charge of everything for you, including handling all correspondence with your creditors and payments
- Creditors will be forced to accept less money than they are owed
- Once a deal is agreed with your creditors, they are not allowed to change their minds
- Once discharged, certain debts will be written off and creditors will be forced to stop chasing you for the money you owe them
Is Bankruptcy my best option?
Bankruptcy is the best route for many with extreme debt, however it isn’t the only option. Depending on your level of debt, your future financial outlook and other factors such as your profession, and your assets, there may be other better options. These options include debt consolidation, Individual Voluntary Arrangements (IVAs) and Debt Relief Orders (DROs). Complete our quick online assessment to see which is best for you.Take our quick online test
Bankruptcy – The Cons
- You will lose any assets of value
- If you own equity in a home it will likely be sold
- If you are a business owner, your business could be sold and your employees made redundant
- If you rent your home and are behind in your payments, you could be forced to leave the property. Furthermore, some landlords will not rent their properties to people who have been declared bankrupt
- You will be charged for the bankruptcy process, with all service and court fees being taken out of your assets
- You must declare your bankruptcy status when applying for credit of more than £500 – making it more difficult for you to be approved for such credit
- All of your financial affairs will be examined in great detail; with the possibility of you facing criminal charges if any irregularities are discovered
- You will be unable to hold certain public office positions, as well as practice various professions, including that as a solicitor and accountant. Furthermore, you will not be able to serve as the trustee of a charity/pension fund
- You cannot be a company director nor trade under a name other than your own
- The fact that you have been made bankrupt will be on public record for anyone wishing to find out
- Your assets may still be administrated by the Trustee/Official Receiver even after you have been discharged after bankruptcy
- Certain debts cannot be written off. These include fines, child maintenance, court orders, debts to secured creditors and debts incurred through fraud
- Bankruptcy does not affect secured creditors. For joint debts, creditors can still demand payment from the non-bankrupt debtor
Whist the above list is not exhaustive, we hope it helps you to see some of the many pros and cons of bankruptcy, and therefore allows you to see how big a decision it is and how it can have a huge effect on your life now and for many years to come.