The way that Bankruptcy works and the impact it will have is widely misunderstood. The problem is that just the idea of using this debt solution brings up negative feelings and emotions so people believe it is something to be avoided at all costs.

The reality however is very different to this. In fact it can be the best way to deal with your personal debts although its suitability will of course depend on your individual circumstances.

In order to understand whether it is right for you it is important to understand more about how you will be affected. To help you with this process we uncover 5 more myths and explain what really happens if you go Bankrupt.

Myth 1 – Bankruptcy is advertised in the newspaper

There was a time when Bankruptcy was advertised in the local newspapers but in 2009 this rule was changed. Now unless you live in Northern Ireland the fact that you have gone bankrupt will not be advertised in your local newspaper.

Your details are still recorded in the Insolvency Register which is publicly accessible via the internet and as such it is possible for someone to find out about your situation. However they would have to carry out a specific search on your name and so it is unlikely that any of your friends, colleagues, your employer or other people who know you will find out.

In fact bankruptcy is no more public than an Individual Voluntary Arrangement (IVA) and your name will be removed from the register after 12 months when you are discharged.

BMD Tip: Your details will also be recorded in an archive called the London, Belfast or Edinburgh Gazette (depending on where you live). However these publications are really only viewed by financial institutions. Most people do not even know they exist.

Myth 2 – Bankruptcy affects your credit rating more than other debt solutions

How Bankruptcy will affect your credit rating will normally be one of your primary concerns. However it is a myth that it will make your credit rating worse than if you had chosen to use any other debt solution. In fact it does not affect your credit rating any differently than if you start an IVA.

Both of these solutions have a very similar effect on your rating. They are both recorded against your credit file  for 6 years. After this time the record falls away your ability to get credit will then slowly start to improve.

BMD Tip: It is possible that if you use a Debt Management Plan (DMP) your credit rating will be affected for even longer than if you had gone Bankrupt. This is because generally speaking it will not start to improve until you have repaid or settled your debt in full which could take more than 6 years.

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

Myth 3 – Bankruptcy means your household belongings will be taken away

This is another great myth of Bankruptcy. You may be worried that the court will take all of your belongings including your TV, fridge freezer, sofa and laptop. In fact this is simply not the case. You will not lose any of your normal household belongings unless they are particularly valuable.

You can keep your electrical items including TV, HI-Fi equipment, computers and kitchen goods. You also keep all of your furniture. Really none of the standard items you find in your home will not be at risk. It is only if you have any items of real value such as antiques that you may be required to sell these.

Myth 4 – Friends and family will be affected by your Bankruptcy

It is a myth to think that any of your family or friends will become responsible for any of your debt if you go Bankrupt. They will not. In fact they will normally not be affected at all not be affected at all. It is a personal solution and only affects you and your income.

Having said that things can become more complicated is if you jointly own a property with your spouse or partner. If there is equity in the property then your share of this may have to be released which will affect the other party.

BMD Tip: Your partner will remain responsible for paying debt after you have gone Bankrupt if it was taken out in joint names or they have agreed to be a guarantor. In these circumstances you must make sure you have a plan for how they will manage the debt at that time.

Myth 5 – You are not allowed to leave country or travel if you are Bankrupt

When you declare yourself bankrupt there is nothing to stop you travelling as long as you can afford to without borrowing money (in general you will not be able to borrow) or someone else is paying.

If you are travelling for a long period you will need to inform your official receiver of your contact details as they need to be able to get in touch with you.

It is even possible to move permanently from the UK. There is nothing to stop you doing this as soon as you have been declared Bankrupt as long as you maintain contact with your official receiver until you are discharged.

BMD Tip: The rules on travel are different in Northern Ireland where you may need permission from the Court before you are allowed to move away from it jurisdiction.