1Stop Money

Bankruptcy

What is Bankruptcy?
The official definition of bankruptcy is “a legally declared inability or impairment of ability, of an individual or organization to pay its creditors” – in other words being unable to pay your debts.
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Debt Management

What is debt management?
Debt management or a debt management plan is a voluntary agreement between you and your creditors, against most unsecured debts, such as credit cards and unsecured loans.
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PPI Claims

Have you ever taken out loans, credit cards, a mortgage or any other financial loans product? If the answer is YES then you could have been wrongly sold Payment Protection Insurance or PPI, without even knowing it.
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Bankruptcy

The official definition of bankruptcy is “a legally declared inability or impairment of ability, of an individual or organization to pay its creditors” – in other words being unable to pay your debts. It can be an important option to consider when an individual is ‘insolvent’ – the term for being unable to pay your debts as they fall due with no likelihood of being able to pay them in the future.

Creditors can file a petition against a debtor owing over £750 – known as involuntary bankruptcy – to try and retrieve a percentage of what they are owed. The supervisor of an entered IVA can also file against a debtor, if the IVA payments are not made. In the majority of cases, however, it is initiated by the debtor – a voluntary bankruptcy.

This effectively releases you from the pressures of being hounded by creditors you have no way of paying –  in order to make a new financial start. Any assets you may have (if any) are sold and the proceeds shared equally amongst your creditors.

It is a good option for people with significant debts, who do not own a home with positive equity in it or any other valuable assets. The restricted term for bankruptcy is 6-12 months – far less in comparison to an IVA, which is for 5 years.

What happens when I file for bankruptcy?

  • You are released from the worry of debt. NO further action can be taken against you.
  • You will lose control of your assets – these fall under control of a Trustee, either the Official Receiver – a civil servant and officer of the court – or a licensed Insolvency Practitioner .
  • Any assets you may have, such as a car over £3000 or a home with significant positive equity in it – will be sold and proceeds shared between your creditors.
  • You will be unable to obtain credit for over £500 without permission from the lender.
  • Your status remains on your credit file for 6 years – as does an IVA.
  • Anyone can go bankrupt, but certain professions will be adversely affected, or are prohibited from continuing to practice, for the duration of your term as a bankrupt.

For details of these professions, see Is it right for me?

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