Pros and Cons of Bankruptcy
| Decision Criteria | Pros / Advantages | Cons / Disadvantages |
|---|---|---|
| Legal jurisdictions? | Bankruptcy is applicable in England & Wales and Northern Ireland. In Scotland the equivalent debt solution is Sequestration. | There are slight differences in the process between England & Wales and Northern Ireland. These will be explained. Bankruptcy in Northern Ireland is less common as an overall proportion of debt solutions entered. |
| Flexibility? | The discharge period is relatively short, though it is probable that you will be subject to some form of payment arrangement over a period of 3 years if you have some disposable income. Property is not dealt with immediately. | Bankruptcy is a formal debt solution over a fixed period of time which is supervised by the Official Receiver or your trustee in bankruptcy. |
| My home at risk? | The equity in your home will be taken into consideration and there may be a requirement to release equity or sell the property. It is unlikely that bankruptcy is the right option if there is meaningful equity in the family home. | |
| My credit rating? |
A Bankruptcy Order is entered on a public register which can be found at: www.insolvencydirect.bis.gov.uk/eiir/ Your credit rating will be adversely affected - the effect on your credit rating will last 6 years. You should not be able to obtain meaningful unsecured credit for a period of 6 years and certainly not prior to discharge. Creditor reporting can be very inconsistent whilst subject to bankruptcy. We offer you access to your credit file after the Bankruptcy Order has been put in place. |
|
| Creditors contact? |
We will undertake initial correspondence and negotiation with your creditors whilst your Bankruptcy Order is put in place. We have an excellent relationship with the majority of creditors for a range of debt solutions. We use industry standards statements and figures for presenting your household budget and payment offers to your creditors. All legal action is suspended once the Bankruptcy Order is in place. They should not ask you directly for payment. If you receive any requests, pass them immediately to us to deal with and tell the creditor that you are bankrupt. |
Your creditors will continue to send statements and notices to you as required by the Consumer Credit Act. These should not be confused with debt recovery communications. Legal notices should not be ignored and we do need to be notified of balance updates or statements showing interest or charges being applied to your accounts. You must not make payments directly to your creditors. Creditors to whom you owe money when you are made bankrupt make a claim to your trustee (either the Official Receiver or us). |
| Effect on employment? | Some specialist types of employment are impacted and this extends to company directors. | |
| Minimum or maximum amount of debt? | Bankruptcy may become a consideration where there high levels of unsecured debts and potentially high levels of secured borrowing that cannot be serviced and there are insufficient assets to be realised to present a workable proposal to your creditors. | |
| Duration to repay? | The norm is 3 years. | You are likely to be subject to some form of formal payment arrangement if you have disposable income. |
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