If you’ve decided to declare yourself bankrupt then the first thing you should do is head to this website to make sure you’re doing the right thing and to make sure you do it properly.
Why people become bankrupt
Bankruptcy is a last resort for people with unmanageable debts, usually totalling £20,000 or more. You can either apply for bankruptcy yourself or, if you owe any single provider more than £5,000, they can apply to force you. Usually, however, it’s only people with debts of over £20,000 who become bankrupt.
For amounts under £20,000, people usually find solutions like individual voluntary arrangements and debt relief orders more suitable.
How it works
You start the process by filling in a form at GOV.uk. You’ll need to have all your financial information to hand – payslips, mortgage or rent details, council tax letters, benefit award letters and so on. You’ll find the full list of documents at GOV.uk.
If you’re in England or Wales you’ll have to pay a fee of £680 (£669 in Northern Ireland) and it’s possible to pay this fee in instalments if you do it online.
When you’ve submitted your application, the adjudicator has 28 days to decide whether to grant your application or whether to reject it.
If your application’s successful
If your application is successful then you’ll receive a bankruptcy order and your bank accounts will be frozen immediately. Some or all of your non-essential assets and property may be sold to pay down your debts and if there are any debts left over, they may be wiped. However, if you have a large enough income, the official receiver might ask you to make further monthly payments for up to three years.
How long does bankruptcy last?
Bankruptcy usually lasts for 12 months from the date of the order and you’re deemed an “undischarged bankrupt” for this period of time. Even after the 12 months is done, your bankruptcy will stay on file for five more years, so credit providers, banks and similar can see the information.
Is it possible to get credit?
While your bankruptcy application is being processed you won’t be able to get a credit card or loan. For the 12 months before the discharge, you probably won’t be able to get or use a bank account with an overdraft facility or a chequebook, either. You’ll be able to use a very basic bank account so you can receive wages and benefits, as well as pay direct debits and standing orders.
Is anything else affected?
Yes, there are other areas of your life that can be affected alongside your banking and credit services. You might find that your insurance premiums go up, as the provider will be able to see you’ve been made bankrupt. Some insurers might ask for the year’s premiums upfront instead of raising the monthly premiums. You may also find that your mobile phone contract is more expensive or that you’re unable to renew it.
In some cases, if the debts are very large, your home may be sold in order to pay creditors, so you have to find a tenancy. This can be difficult, so if you have a financially sound relative or friend, you could ask them to act as guarantor.
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