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Bankruptcy in England & Wales

Bankruptcy is an alternative to an IVA where serious debt problems exist. Many myths about bankruptcy abound. These myths cause fear and trepidation for many people. In reality many people (depending upon their circumstances) are able to retain their homes and can keep modestly valued vehicles that they require.

In particular bankruptcy may be useful for people with unmanageable debt but who are not in a position to contribute towards those debts (as would usually be required on a monthly basis if using an IVA).

Bankruptcy may also be considered to be a preferable option compared to an IVA for some people that can afford to make monthly payments towards their debts. This will especially apply to those with few assets that would be put at risk by becoming bankrupt. The reason for this is that payments towards the debts will usually run for three years in bankruptcy as opposed to the standard five years used for an IVA.

Residents of Scotland and Northern Ireland also have access to (different) bankruptcy processes. Further information can be found at: Scotland; Northern Ireland.

To go ahead with declaring bankruptcy, an individual must now apply online. It’s acceptable for an associate or a debt adviser to assist you with this.

An application fee will be payable. At the time of writing the sum is £680. If you pay online, the total amount due to can be paid gradually in instalments.

After reviewing your application, an adjudicator will decide whether to grant your application.

Once your bankruptcy order has been granted, you will be contacted by the Official Receiver. The Official Receiver is a civil servant who will become responsible for ensuring that you contribute towards your debts if you are in a position to be able to afford to do so.

Some companies advertise that they can assist you with the bankruptcy process - for a fee. Our experience is that the majority of people have no need for such a service and are perfectly capable of handling the process themselves. However in very complicated cases, perhaps connected to business failure, reputable assistance may be useful.

Bankruptcy is a very serious process and one that should only be started after good advice and careful thought. It may have a very significant impact on people in certain professions, people with restrictions in their contracts, and those that have equity in their homes. However, for many other people bankruptcy may be the quickest and most certain way to put their debt problems behind them.

Becoming bankrupt will have a very serious effect on your credit rating, will be recorded on a public register, may result in restrictions being placed upon your expenditure and might put certain assets that you own at risk of having to be sold.

Anyone considering bankruptcy that has debts below £20,000 (£15,000 in NI) should also read our page on Debt Relief Orders.

A creditor can only petition to bankrupt you if you owe £5,000 or more to them (previously the applicable amount was £750).

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