Declaring yourself bankrupt is an extremely difficult decision to make, but it is sometimes necessary if you find yourself overwhelmed with debt that you cannot pay. Bankruptcy is often a topic prickling with stigma, but some people may not be aware what is actually involved when you must consider having to file for bankruptcy.
Building up significant debt is simply done by spending money that you do not have. This can be easier to do than you may think, as wages stagnate and living costs continue to climb during turbulent economic times.
How do you go bankrupt?
If you are wondering how to declare yourself bankrupt, it is recommended that you consult with a financial adviser who will be able to explore a range of debt solutions with you to confirm that bankruptcy is the best option. Becoming bankrupt will change your life, so it isn’t a step to be taken lightly.
Once it has been confirmed that bankruptcy is suited to your situation, you will need to apply for bankruptcy via your local court, which they will then approve or deny. To do this, you will need to complete two forms; the Debtor’s Bankruptcy Petition and Statement of Affairs. Multiple copies of these along with a £525 fee for managing the bankruptcy, and a further £175 for court costs will need to be filed with your local bankruptcy court.
The additional court cost fee may be able to be waived if you receive income support. A bankruptcy order will then be issued by the court if your application is approved, and your bankruptcy will then begin and usually last for 12 months.
How will bankruptcy affect me?
Once you are made bankrupt by the court, you will be subject to certain restrictions. These include not being able to borrow more than £500 without informing the lender that you are bankrupt and not being able to act as a director to a company. These restrictions usually last for 12 months from the date that you are made bankrupt.
You will be required to surrender your assets which will then be sold to pay off your debts – an Official Receiver assigned to your case will evaluate your assets via a face to face interview to investigate what you have available to contribute towards this repayment. You can usually keep items needed for your job and household items, but you may be required to sell your home if this is the only way that you can pay off your debts.
You must give all of your bank cards, credit cards and cheque books to your assigned Official Receiver. Your accounts will be frozen during your bankruptcy, but money can sometimes be released in an emergency.
Personal information such as your name, address and details of your insolvency will be recorded on the Individual Insolvency Register. These details will remain on the register for the duration of your bankruptcy and for up to three months after it ends. As this record is publicly available, anyone can perform a search for any insolvency orders against you – this includes potential creditors.
How do people cope with bankruptcy?
Although bankruptcy is tough to deal with, many people go through it. For example, 6,430 bankruptcies were processed at the request of the debtor in the second quarter of 2012. High profile names have also had to declare bankruptcy before including actor Christopher Biggins. Biggins said that during breaks in acting work, he was still spending money despite not earning it and therefore built up significant debt that he couldn’t afford to repay.
Entering into voluntary bankruptcy introduced much needed discipline into his financial routine, and allowed him to pay off his debts within 12 months. Biggins has even stated that declaring bankruptcy was the best thing to happen to him.
Rosie Percy is a writer specialising in areas such as business, health, education and personal finance. Rosie has previously written for the Guardian and lifestyle blogs, and now lives and works in Brighton.