Other Solutions - Bankruptcy
Bankruptcy is often the last resort when all other debt solutions have been exhausted. Bankruptcy still has negative connotations in people's minds, but it is not as bad as it many believe it to be and, fortunately, will certainly no longer hold you back as it once would have done.
There are three ways in which you can be made bankrupt. The first is by doing it yourself - you can voluntarily enter into bankruptcy. The second way is by the creditors themselves - if you owe a creditor at least £750, they can force it on you. Finally an IVA Supervisor can also force you into bankruptcy if you miss payments on an IVA.
While it will clear all of your debts, you will remain bankrupt for about a year (although this can be less if it is the first time you have been declared bankrupt). Unfortunately, during this time, there are a number of limitations restricting what you can do.
Among the restrictions you will face as a bankrupt are:
- You lose control of your assets - including your home if there is equity in it (there is a 12-month breathing period before your house is affected)
- You won't be able to get credit for more than £250 unless the lender approves it
- You cannot be a company director
- You cannot be a chartered accountant or lawyer
- You cannot act as a JP, MP or councillor
Bankruptcy is not a private affair either. Not only will all of your financial affairs be examined in a public court, which anybody can attend, but your name will also be published both in the London Gazette and your local newspaper.
However, while these restrictions can seem rather daunting, bankrupcy does have the advantage of freeing you from your debts and allows you to make a fresh start. After the period has ended, the restrictions are lifted and you will be able to start building up your credit rating again.