What to Expect After Becoming Bankrupt

4:57 PM

What to Expect After Becoming Bankrupt

If you have large debts that you feel you simply can’t cope with anymore and you’re thinking about bankruptcy, then you could try using Creditfix for help and advice before making any definite moves. Bankruptcy isn’t right for everyone, but if it is right for you then you need the right people with you.

What to Expect After Becoming Bankrupt 

Why people declare themselves bankrupt

You can apply to become bankrupt for yourself or your creditors may force you. If you owe one creditor over £5,000 then it can apply for your bankruptcy. In reality, however, bankruptcy is an absolute last resort and it’s only advisable for borrowers with unsecured debts of £20,000 and over.

If you owe less than £20,000 then you may be better with solutions like individual voluntary arrangements (IVAs) or debt relief orders (DROs).

How does it all work?

To become bankrupt, you must fill in a form at the website. You’ll need to have documents like payslips, bills, council tax letters, rent or mortgage agreements and the details of all your debts.

In England and Wales, it costs £680 to apply for bankruptcy (it’s £669 in Northern Ireland) and while this might seem like a lot, you can pay it in instalments (minimum of £5) if you pay it online.

Once your application is in, the adjudicator has 28 days to decide whether to accept it and issue a bankruptcy order or to reject it.

If you’re successful

If you get a bankruptcy order then your bank accounts are all frozen immediately. Some or all of your non-essential assets could be sold to pay creditors and the remainder of the debt is written off. In some cases, if you have enough disposable income, you might be asked to make some ongoing payments each month for up to three years.

How long bankruptcy last?

Bankruptcy usually lasts for 12 months, during which time you’re an undischarged bankrupt. Once the 12 months is up, your bankruptcy remains on file for five more years; credit providers and banks can see this information and use it in their decision-making processes.

Is it possible to get credit?

While you’re filing for bankruptcy you can’t get a personal loan or a credit card and during your period of bankruptcy you won’t be eligible for a bank account that has an overdraft facility or a checkbook.

You’ll probably have to make do with a very basic bank account so you can pay direct debits and standing orders and receive wages and benefits.

What else is affected?

It’s not just credit offerings like overdrafts and loans that can be affected by becoming bankrupt. You’ll find other services and products can be too.

Your insurance premiums may go up as your providers can see that you have been bankrupt in the recent past. This is to cover what they see as an additional risk, as you pay for an annual policy in monthly installments. Alternatively, your insurer may offer you the chance to pay for your whole year upfront to keep down the cost.

In cases of very large debts, your home might be sold to pay your debts so you have to find a rental property. Finding a tenancy agreement after bankruptcy can be difficult, so having a financially-stable relative or friend to act as guarantor is a good idea.

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