If you’re drowning in credit card debt, you need to take action before your creditors get there first. Bankruptcy Clinic can help by explaining the debt solutions that are available to you, so you can make an informed decision about what to do.
Depending on your circumstances, these solutions could include an informal Debt Management Plan or a form of personal insolvency, such as an Individual Voluntary Arrangement, Debt Relief Order or bankruptcy. In this article, we focus on bankruptcy and when it might be a good choice for managing credit card debts.
Bankruptcy is a legal process that involves going to court and handing control of your estate over to the Official Receiver, who may order any valuable assets to be sold for the benefit of your creditors. This means you could lose your home if you’re a property-owner, or have to sell your share of the equity to a partner, relative or friend.
Most bankruptcies are discharged 12 months after the Bankruptcy Order is made. After this, any debts listed in the bankruptcy documents will be written off. So you could find yourself walking away from most or all of your debts in just a year’s time. However, as with all debt solutions, there are pros as well as cons that you’ll need to weigh up carefully.
When bankruptcy might be an option
Declaring bankruptcy tends to be seen as a last resort for dealing with debt problems that have got out of control. It’s likely to be an option if your debts are overwhelming and you have no realistic means of paying them off. This could easily happen with credit card debt, for example, if you accrued large balances on several different cards and then lost your job so you couldn’t afford the monthly repayments.
Bankruptcy is especially worth considering if you don’t own your home or any other valuable assets, as there will be nothing for the Official Receiver to take away. And if you have little or no disposable income, you won’t need to pay anything towards your debts once your Bankruptcy Order is in place.
However, if you do have any disposable income after your essential living costs have been accounted for, note that you may be asked to make regular payments to your creditors for up to three years.
Key things to consider
- Job roles and public offices
If you’re made bankrupt, you won’t be allowed to hold certain job roles or public offices. For example, you’d be barred from practicing as a lawyer or accountant, or from being the director of a limited company. If you think your current or future career prospects might be affected by bankruptcy, ask Bankruptcy Clinic for advice straightaway.
- Your bankruptcy will be made public
Details of your bankruptcy will appear in the newspapers and the public Insolvency Register. This means your employer, friends or family could find out about it even if you try to keep it quiet. Bankruptcy doesn’t carry the same stigma that it used to, but you might like to consider alternative options if you don’t want people to know about your money problems.
- Your credit rating will be affected
Your bankruptcy will appear on your credit file for up to six years from the date of your discharge. During and even after this time, you might find it harder to obtain credit. However, you may be able to repair your credit rating by using small amounts of credit sensibly in the future, although your interest rates will probably be higher than normal.
- Bankruptcy Restrictions Orders
If the court thinks your bankruptcy has been caused by reckless or dishonest behaviour, they may extend the limitations of your bankruptcy with a Bankruptcy Restrictions Order (BRO). This might happen if you ran up large amounts of credit card debt to cover gambling costs, or if you applied for cards using false information. A BRO can last for up to 15 years.
Like to know more?
The expert team at Bankruptcy Clinic can help you decide whether to file bankruptcy to deal with your credit card debts. Just get in touch with your questions and we’ll guide you towards the right solution for your needs and circumstances.
Call Bankruptcy Clinic today on 0808 168 7389 or 01625 462 770, or apply online with our quick enquiry form.