Personal bankruptcy is a legal procedure for people whose circumstances are unlikely to change and who have no hope of paying off their debts within a reasonable time. It is a form of insolvency and that's normally only suitable if you can’t pay back your debts in a reasonable time. When you make yourself bankrupt, almost all of your unsecured debts are written off, allowing you to make a fresh start.
The moment the bankruptcy order is made, you will achieve relief from pressing creditors. Depending on your circumstances, you will be automatically discharged from bankruptcy anywhere within 12 months.
Should I go for bankruptcy?
All too often the very people who would benefit most from entering into bankruptcy dismiss the idea out of hand due to a fear of the repercussions. It usually comes down to a simple lack of knowledge of the facts. Listed below are the suitable circumstances for those who might benefit from entering into the protection of a Bankruptcy Order:
It is a generally held misconception that personal bankruptcy is punitive and that bailiffs will seize your goods and chattels leaving you nothing but a change of clothes. This is false. You enter into the protection of a Bankruptcy Order to do exactly that; to protect yourself from creditors and to make a fresh start. Under Section 283(2) of the Insolvency Act you are allowed to keep the tools of your trade, all clothing, bedding, furniture and even your car (provided it’s not too expensive and subject to certain conditions) the general principle is that your goods and chattels are safe.
With the introduction of the Enterprise Act in 2004, the mandatory period required to serve under Bankruptcy has now been reduced from three years to one. Bankruptcy is no longer the punitive action of years gone by and is designed to allow people the opportunity of rebuilding their lives. In some cases, bankrupts can be discharged from bankruptcy in as little as four months at the Official Receiver’s discretion. An early discharge is possible provided no creditors object. For those granted an early discharge, the average discharge period is around 7 months.
You can keep the following items of property unless the individual value of each is more than the cost of a reasonable replacement:
Effect on credit rating
You should understand that when you declare yourself bankrupt, you will stop making your normal monthly payments to your creditors. This means that your accounts will go into arrears. This will have a negative effect on your credit rating.
Debts You Cannot Discharge in Bankruptcy include: