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What is Bankruptcy

What is Bankruptcy

What is Bankruptcy

Bankruptcy is one of the ways to resolve a personal debt problem. Despite what you might think it can often be an extremely good solution to consider.

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What is Bankruptcy?

What does it mean if you go Bankrupt? What happens to the money you owe? Will you have to make any payments towards your debts? How long does Bankruptcy last? To find out more please visit

What happens to your Debts if you go Bankrupt?

Once you are bankrupt all of your unsecured debts are taken away from you. Any payments that you are making directly towards them stop. After your bankruptcy is completed any included debt left outstanding is written off.

You are given immediate protection from your unsecured creditors. They are no longer allowed to hassle you for payment and cannot take further legal action to try and enforce their debt.

If a CCJ (County Court Judgment) or Attachment of Earnings has already been issued against you it will be overturned. In Addition any ongoing bailiff action has to stop immediately.

Once you are bankrupt you may have to continue making payments towards your debts. However any payments required will last a maximum of 3 years.

How long does Bankruptcy last?

Bankruptcy normally lasts for just 12 months (1 year). After this time you are automatically discharged. In certain circumstances some of the effects can be extended. This is known as a Bankruptcy Restriction Order (BRO).

If you have disposable income you will normally have to pay this towards your debts. This is known as an Income Payment Agreement (IPA) and will last for 3 years. As such an IPA will continue after you are discharged.

It is also important to understand that bankruptcy will be recorded on your credit file. The record will remain for 6 years from the date you go bankrupt. As a result your credit rating will be negatively affected for much longer than the period you are actually bankrupt.

Once you are bankrupt it does not mean that borrowing will be difficult for ever. Your credit rating will eventually repair. Depending on your circumstances it will also possible to get a mortgage.

What happens to your Home in Bankruptcy?

If you are a home owner one of the main concerns you may have about bankruptcy is that you might be asked to sell your property. In reality the risk of this is actually relatively low.

The Official Receiver does not want to force you to sell your home for the sake of it. They are simply interested in any equity that might be in it which could be released for the benefit of your creditors.

If there is little or no equity in your property then there should be little or no risk to it. However you may still have to buy back your interest for a nominal sum. Where there is some equity it is possible to protect your home if this money can be raised by a third party.

If you are a home owner you should not consider bankruptcy without getting advice from a debt expert. Give us a call or complete the form below and we will advise you on the implications for your property.

Can you keep your Car and Possessions if you go Bankrupt?

It is a myth that if you declare bankruptcy you will lose all your possessions and be left with nothing. This is just not true. In this regard bankruptcy is really no different to any other debt solution.

Generally speaking you are allowed to keep anything you own that if individually sold would fetch less than £500. As such in most cases you will be allowed to keep all of your possessions such as furniture, kitchen equipment and electrical appliances including an ipad and mobile.

You will only really be at risk of having to give up any of your possessions if you own anything of particular value such as antiques or a valuable car.

There are special rules concerning what will happen to your car if you go bankrupt. If you need a car then you will be allowed to keep it as long as its value is no more than £1000.

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