Bankruptcy can be a choice as a debt solution when you are not able to manage your debts.
A court issues a bankruptcy order when a bankruptcy petition is filed either by you or by your creditor who owe at least 750 pounds by you. It can also be filed by a supervisor or any one bound by Individual Voluntary Arrangement. When a petition is filed, the court issues bankruptcy order and it can not be cancelled even when you don’t acknowledge it.
Once a petition is filed, your assets fall under the control of the Trustee which can be either an Official Receiver who is an officer in the court or a licensed Insolvency Practitioner. This Trustee is now responsible to recover your assets and liabilities and also to minimize the repayments to the creditor.
In this way after the bankruptcy order your creditor can no more pursue you for payments.
Duties of a Bankrupt
- Once your bankruptcy order has been issued by a court, you are supposed to produce a list of all your assets and debts to your Official Receiver or Insolvency Practitioner within 21 days.
- Your increased income or assets must be declared to your Trustee.
- If you are going to obtain a credit of 250 pounds or more from a person, you should inform him of your bankruptcy.
- You are not supposed to make any direct payments to your creditors.
- To attend the court is mandatory for you to give reasons for being in debt; otherwise you can be put to legal punishment.
Effects of Bankruptcy:
- It directly affects your professional life as you can not act as a Company Director after being announced as a bankrupt.
- Your business life is also affected as you can not trade in any business without informing concerned persons about your bankruptcy.
- You can be publicly examined in the court.
Advantages
- If you go bankrupt, your debts are taken away from you and you are no more supposed to repay them.
- Your assets like car and house might be at risk but household goods are saved and no one can deprive you of them.
- You can be discharged from bankruptcy after a year and all the restrictions are lifted automatically.
- Your payment plan lasts not more than three years with the court which is less period as compared to IVA.
Disadvantages
- You are required to pay extra money to the court as a fee for three years.
- Bankruptcy affects your credit rating badly as the record of your bankruptcy remains on your credit file for six years.
- The social stigma attached to bankruptcy, you feel like being a criminal which you are certainly not