Voluntary Versus Involuntary Bankruptcy

Bankruptcy is often seen as a last resort for dealing with debts that have become truly overwhelming. To put it simply, bankruptcy may be your only option if you owe at least £750 in unsecured debts and you have little or no disposable income or assets with which to repay them. If you find yourself in this situation, you can declare yourself bankrupt voluntarily or, if your creditors get there first, you could find yourself forced into bankruptcy by the court.

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Declaring yourself bankrupt

Bankruptcy places a number of limitations and restrictions on your personal and professional life, so voluntary bankruptcy isn’t a decision to be taken lightly. It’s vital to seek professional help from a qualified bankruptcy service like Bankruptcy Clinic before you proceed, as it may be that a different debt management solution is more appropriate for your circumstances.

However, if bankruptcy turns out to be your best option, there are advantages in taking the initiative yourself, rather than waiting for your creditors to start proceedings against you. Firstly, you’ll be showing the court that you’re willing to take steps to resolve your financial problems, which may stand in your favour. Secondly, once your Bankruptcy Order is in place, you’ll be legally protected from your unsecured creditors and they’ll have to suspend most types of court action that they may be taking against you.

If you decide to go ahead with declaring bankruptcy, the expert debt advisers at Bankruptcy Clinic will help you complete all the paperwork for your Bankruptcy Petition and prepare for your court appearance. We’ll take the time to fully understand your financial situation, including details of your income, outgoings and debts, so we that the information presented to the court is as accurate as possible.


Involuntary bankruptcy

Things work a little differently if one or more of your creditors take action to force you into bankruptcy. They’ll file a Bankruptcy Petition with the court, which will result in a Statutory Demand for payment being sent to you. This gives you 21 days to pay off your debts, or 18 days to provide proof to the court that they should dismiss the claim.

If you don’t respond to the Statutory Demand, a Bankruptcy Order may then be made against you. You’ll be asked to complete paperwork about your financial situation and be summoned to make a court appearance. If this happens to you, Bankruptcy Clinic can still help in the same ways as if you were declaring yourself bankrupt voluntarily – so there’s no need to struggle on alone.


Bankruptcy fees

Whether you become bankrupt voluntarily or involuntarily, you’ll still need to pay bankruptcy fees to the court and the Official Receiver. These are typically around £700 in England and Wales. If you want Bankruptcy Clinic to help you with your Bankruptcy Petition and court appearance, you’ll need to add on the cost of our fees as well. You’ll find more information about this on our website.


The good part about bankruptcy

As mentioned above, you’ll have legal protection from your creditors as soon as your Bankruptcy Order is in place. And in most cases, your bankruptcy will be discharged just 12 months after the Order is made. After that, all unsecured debts listed within the bankruptcy will be written off.

This means that you could be in a position to make a totally fresh financial start just a year after being made bankrupt.


Things to consider

Of course, there are downsides to bankruptcy as well as advantages. Your ability to obtain further credit or a mortgage in the future will be affected. You’ll be restricted from holding certain job roles and public offices. Details of your bankruptcy will be published in the newspapers. And the court may require you to make monthly payments to your creditors from your disposable income for up to three years after your Bankruptcy Order is made.


Ask Bankruptcy Clinic for expert advice today

If you can no longer afford to repay your debts, or you think your creditors might take court action against you, it’s time to get help – fast. The specialist team at Bankruptcy Clinic are ready and waiting to take your call. As soon as you contact us, we can help you start managing your financial problems and embark on your journey to getting debt-free.

Call us free today on 0808 168 7389 or on 01625 462 770 from a mobile. Or complete our website enquiry form and an adviser will contact you as soon as possible.

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Andy Gorton is the author and editor of the Bankruptcy Clinic

Andy Gorton – who has written posts on Bankruptcy Clinic Blog.

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