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Creditors
don't want to bring bankruptcy upon you because there is
very little in the way of compensation for an unsecured
creditor in a bankruptcy (i.e. they will never regain
the majority of your debt).
Typically, a bankruptcy will be petitioned by a
Government service or by the debtor themselves, as a
means of ending the nightmare of bad debt problems.
What is the purpose of
bankruptcy?
The purpose of bankruptcy is to convert your
possessions, and any wages you receive, into lump sum
and instalment payments for creditors. A debtors purpose
to apply for their own bankruptcy is to form a
moratorium (a group of creditors) to agree part
repayment of all outstanding debts, and when the agreed
repayment has been met, to have a 'clean slate'.
What does a bankruptcy
order mean?
A bankruptcy order means that an individual creditor
cannot make a claim against you, all claims must be made
via the trustee (the person who controls the
bankruptcy), otherwise the debt is written off.
How long does a
bankruptcy typically last?
A bankruptcy will normally last until the third
anniversary of the bankruptcy order. During this time
you cannot hold public office or be a business director
and you cannot apply for credit over £250 without
notifying the lender of your bankruptcy.
Your credit file will show your bankruptcy for six years
from the bankruptcy order.
Is a voluntary
arrangement an alternative to bankruptcy?
A voluntary arrangement is a contract between you and
your creditors, where you pay a monthly sum over a set
period. The total is divided up between your creditors,
who accept this sum in settlement of your present debt.
The advantage of a voluntary arrangement is that settle
your debt problems without having to declare bankruptcy.
A voluntary arrangement is legally binding too, meaning
that once the agreed terms have been satisfied you have
no further obligations to your creditors.
Unlike bankruptcy, a voluntary arrangement does not
affect your employment or business status and is not
widely advertised.
How can I avoid
bankruptcy?
If you have bad debt problems and are heading towards
bankruptcy one solution is to enlist the services of a
debt management company.
A debt management company will evaluate your personal
finances and debts and develop a financial plan that not
only repays your debts but also allows you to live a
reasonable life.
Successful debt management can help get your finances on
track and stave off the threat of voluntary arrangements
or bankruptcy.
Find out more
about debt management
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