Is bankruptcy right for me?

Is bankruptcy the right choice?

Bankruptcy is a good option for people with significant debts, who do not own a home with positive equity in it or any other valuable assets. The restricted term is 6-12 months – far less in comparison to an IVA, which is for 5 years.

Pros

• The responsibility for repaying your debts is removed by the Court.
• Creditors are not permitted to contact you, demand repayment of money or add further interest or charges. (see Bankruptcy Exemptions)
• The majority of your debts will be written off by the Court. (see Bankruptcy Exemptions)
• The term for is 12 months and in many cases significantly less, so in a short time you will be free to make a fresh financial start.

Cons

• You may be unable to work in a number of professions, including justice of the peace, lawyer or chartered accountant, Member of Parliament or owning/managing a limited company during your term. You may also be unable to work for the local authority, police force or army – you would need to check your contract.
• When you go bankrupt, any assets that you may have – such as a car over £3000, a house with equity or owning a business – will be sold and the proceeds shared between your creditors. PRO – If you can prove a car is a necessity to you, for work, school etc, they will replace your car with a cheaper but RELIABLE car.
• A bankruptcy order can be accompanied by an Income Payment Order (IPO) – meaning you will have to make payments to the court over a period of 3 years – if you can afford to do so.

In essence – for the hundreds of thousands of people in severe debt , without positive equity or any other valuable assets, who do NOT work in one of the restricted professions – bankruptcy or debt management can be a more favourable option than an IVA.

IVAs are beneficial to people who do own significant assets or who work in one of the professions outlined.