Credit card debt can spiral out of control especially if you find yourself are using your cards to subsidise your general living expenses. or you have been through a particularly expensive period such as Christmas.

If you find yourself in this situation one of the options you can consider to resolve the problem is Bankruptcy. This is often seen as a solution to be avoided however this should not be the case. Depending on your particular financial situation it may in fact  be the best solution for you.

If you are not a home owner or have little or no equity in your home Bankruptcy is one of the fastest and least expensive ways for you to deal with your credit card debt and any other unsecured debt you have.

Will I still have to pay towards my credit card debt?

As soon as you go Bankrupt you stop paying your credit card payments (if you have not already done so). In fact you are no longer allowed to continue paying them directly and the pressure of trying to find the money to do so is taken away from you.

The Official Receiver (OR) will then look closely at your income and your living expenses budget. If after all of your monthly living expenses have been taken into account there is nothing left from your income you will not have to make any payments towards your debts.

As long as this situation does not change after 12 months you will be discharged and all of the credit card debt you had will be written off.

If you do have money left over after allowing for your reasonable living expenses then you will have to pay this disposable income to the OR each month. However this payment will only last for 3 years.

BMD Tip: Remember if you have any valuable assets such as a car worth more than £1000 then you may have to sell this to pay towards you debts. In addition if there is considerable equity in your property this could be also be at risk.

Do you want help to go Bankrupt? Give us a call on 0800 077 6180 or complete the form below to speak to one of our experts

Will the court stop me from going Bankrupt if I have used my cards recently?

The fact that you have recently used your cards for whatever reason will not mean that the court stops you from going Bankrupt.

It is quite normal to have been using your cards almost up to the date you go Bankrupt especially if you have been using them to supplement your income and pay for essential living expenses.

As long as you stop using your cards as soon as you decide that you will make your application then there will be no problem. In fact you are even allowed to draw cash from your cards to pay for your Court fees.

BMD Tip: You might think you will have to delay your application to put some time between this and the last time you used your cards to avoid being accused of fraud. However there is no reason to do this the Court will not think you have acted fraudulently.

Will I be able to get more credit cards once my bankruptcy is over?

Even though Bankruptcy lasts for just 1 year your credit rating will be poor for at least 6 years from the date your application is accepted and during this time and you will find it difficult to get credit.

However as soon as you are discharged from bankruptcy there are some things that you can do to start improving your credit rating. Ironically one of these is to get a so called credit repair credit card.

Credit repair credit cards are available from a number of lenders and are designed for people who still have poor credit ratings. If you apply you will be offered a card with a small credit limit. The starting limit is normally £500 although this may be increased up to c£3000 if you use the card responsibly.

If you start using this type of card and paying the balance in full each month you will not be charged interest and it will help repair your credit rating. Then in time you will be able to apply for different forms of credit and different credit cards if you want to.

BMD Tip: Credit repair credit cards charge very high interest rates – normally between 30%-40%. It is therefore very important to use these cards only to pay for your regular monthly spending such as fuel and food and ensure that you pay the balance off in full each month so as not to incur additional interest charges.