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Being Declared Bankrupt
Whether you enter bankruptcy voluntarily, want to know how to declare bankruptcy or it is forced upon you by your creditors, the results of being declared bankrupt in the UK can have very real and lasting consequences. To help you better understand what these are, we have compiled a list of some of the biggest below:
Risks to Your Assets
When you are declared bankrupt, any of your assets that are of real value, such as property and shares could be sold to pay your creditors. Furthermore, if you own a property jointly with another person, the property may still be sold in order to pay what you owe. Because of this risk to your property, bankruptcy should not be considered an option for non-priority debts. In addition, any gifts or undervalued sales you have made in the 5 years leading up to your bankruptcy will be investigated. If it is found these were made when you were insolvent, steps can be taken to claim back the value of these from the recipient.
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
Risks to Your Future Credit & Lifestyle
If you are declared bankrupt in the UK you must state this when applying for credit over £500 in the future. This includes hire purchases and conditional sale agreements. If you do not state this, you may be prosecuted. Furthermore, because obtaining credit will be very difficult, it will make future endeavors such as starting your own business extremely difficult. If you own a business, because your bankruptcy will be advertised locally and made public record, your reputation and that of your business could be significantly damaged. Compounding this is the fact that you cannot run a business in any name other than the one used when made bankrupt. In addition, if you do run a business, the equipment you use and your stock may also be sold to repay your debts.
Risks to your Bank Accounts
Once a Bankruptcy Order has been issued, your bank and building society accounts will be immediately frozen. This means that you will be forced to stop using any account cards, as well as no payments being allowed into or out of your accounts.
Risks to your Savings
Any savings you have will instantly become part of the bankruptcy estate and used to pay your creditors. Therefore, it is always recommended that you use any savings you have to pay off as much of your debts as possible in order to avoid bankruptcy when possible.
Risks to your Pension
Being declared bankrupt can affect your pension. What will happen depends on various factors, including what type of pension you have, whether you are currently receiving pension payments or whether you will begin receiving pension payments within 4 years of being declared bankrupt. Because pensions are such a complicated area, it is always recommended that you fully understand these possible consequences before you begin the bankruptcy process.