Bankruptcy is the right debt solution for many but it is highly likely that you could discard the idea straight away because you believe that there are so many negatives associated with it.

In fact this solution is generally not as bad as you might fear and for many it can be perfect for resolving a serious debt problem.

However as with all debt management solutions whether or it is suitable for you really does depend on your personal circumstances. This article will help you decide if the things that you are worrying about really apply to your situation.

How am I going to pay the Bankruptcy fee?

The upfront cost of Bankruptcy when you are already struggling to pay your debts can be enough to put you off the solution altogether. However it is possible to find the money in several ways.

Firstly you can save the money by no longer paying your creditors. Of course it might take a few months to save your fee in this way.

Secondly it may be possible to borrow from friends or family. However if this is not the case then if you have any available credit on credit cards or an overdraft you can use these facilities to draw cash for your fee that way. These debts will then be included in the Bankruptcy.

BMD Tip: However difficult you find it to get the fee you need together this will pay off in the long run as once you are bankrupt all your unsecured debts will be taken away from you and your creditors must stop any action they are taking against you.

I will lose my home if I go Bankrupt

The biggest fear of Bankruptcy that will keep you up at night is that you will lose your home.

If you are renting your property you have very little to fear. Your landlord will be told but this very rarely causes any issue as long as you pay your rent on time. If you are a home owner and there is little or no equity in your home then it is very unlikely to be at risk.

BMD Tip: If you believe there is significant equity in your property you should not go bankrupt without first getting a local estate agents valuation to confirm the value of your property and getting advice from one of the experts at Beat My Debt.

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I will lose all my household possessions if I go Bankrupt

Many people fear that all their assets including electrical items such as laptops and televisions will have to be sold if they go bankrupt. This is not the case.

If you have very valuable items such as antiques then these may need to be sold but normal possessions including electrical items and furniture will not be at risk. In fact in terms of household goods, most people would not even tell that they had gone bankrupt.

The one asset that you do need to be careful of is your car. If your car is worth over £1000 you may not be able to keep the vehicle if you go bankrupt unless you have a good reason for doing so or a third party can pay the difference between the value of the car and £1000 on your behalf.

This does not mean that you cannot have a car. It simply means that you might have to sell a more expensive car and buy a cheaper one with the proceeds either going towards paying for your bankruptcy or being paid to the official receiver.

When I am Bankrupt I will have no money to live on

Keeping you awake at night could be the thought that you will have noting left to live on because all your money will be taken to pay your debts. Again this is not the case.

In fact only once all of your reasonable living expenses have been taken into account will any of your income have to be paid towards your debts. Spare income is known as disposable income. If you go bankrupt and have no disposable income you will pay nothing towards your debts.

If you have any disposable income you will have to pay towards your debt but these payments will only last for 3 years.

Once I go Bankrupt I will never be able to borrow again

It is true that your credit rating will be negatively affected but this does not mean you will never be able to get credit again.

Bankruptcy itself only lasts 12 months and after that you are discharged. However a record will remain on your credit file for 6 years. During this time your credit rating will be poor and it will be difficult to get credit.

After 6 years the record will come off your credit file and you will be able to rebuild your credit rating and slowly begin to borrow again if you want to.

Everyone will know I am Bankrupt

Bankruptcy is no longer made public in the local newspaper (unless you live in Northern Ireland where bankruptcy is still advertised in the Belfast Telegraph). As such it is extremely unlikely that your friends and family will find out about your if you do not want them to do so.

Your details will be recorded in the insolvency register which is a publicly accessible on line database. However unless someone specifically searches for your name and address in the register they will not find out about your situation unless you tell them.

I will lose my job if I go Bankrupt

It is very rare that you will lose your job after going Bankrupt. Most people’s employment is simply not affected even if you work in most civil service positions. Likewise if you are self- employed you can continue your business. Your employer will not be informed either.

The only time you need to worry about your job is if you are in a specific position such as a company director or you work in the financial services, The Law Society or as a pub licensee.However the number of jobs that are actually affected are very few.

Going Bankrupt means I will lose my pension

You may be worrying about your pension but it is actually rare that it will be affected. If you have not yet reached pensionable age then your current pension fund cannot be accessed so you will not lose what you have built up already. If you are discharged before you draw your pension there will no longer be any claim on it.

Your pension is really only of any concern in if you are already drawing a payment from it. This money will be treated as income and taken into account when calculating if you need to pay anything towards your debts.

The other possible issue is if you reach pensionable age during your bankruptcy. Where this happens you may be required to release the tax free lump sum to pay towards your debts. For this reason you must get further advice from Beat My Debt if you are nearing pensionable age.

I cannot travel abroad while I am Bankrupt

There is no reason why you cannot travel abroad while you are Bankrupt as long as you maintain a line of communication with your official receiver. As such you are allowed to go on holiday if you wish.

You can also move abroad permanently before you are discharged if you want to. However you need to maintain contact with your OR and inform them of your financial circumstances in your local country if appropriate.

BMD Tip: The rules on travel are different if you live in Northern Ireland where you might have to get permission from the Court before you go.

I will not be able to have a bank account once I am Bankrupt

This is another worry that keeps many people up at night. However, it is not true that you cannot have a bank account but it is likely that you will be unable to keep your current one.

You will be able to have a simple account where you will have all the standard facilities of a current account but without any borrowing terms until your bankruptcy has ended.