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What is Bankruptcy ?

Bankruptcy is a necessary when a person has debts that they cannot afford to repay and other options are not suitable or have failed. It is usually considered to be a last resort and if you are considering bankruptcy you should check that other help such as debt consolidation or an Individual Voluntary Arrangement procedure (IVA) would not be a better alternative.

Bankruptcy aims to help relieve your debt problems but you should be aware that there are some restrictions and disadvantages to this. The process aims to help pay back any money that you may have in any assets and use this to repay the creditors that you have.

The process of bankruptcy
You can both declare yourself bankrupt and file for your own bankruptcy or this can be filed for by the creditors themselves. If you owe more then £750 then you can be declared bankrupt. You should also be aware that if you are in an IVA and fail this, that your insolvency practitioner can also petition for your bankruptcy.

Should you have any dispute with your creditors claim for bankruptcy then you can appeal against this or you could try and reach an agreement outside of the Court. It is important that you do this before the order has been made as doing so afterwards can be complicated and will often cost you money.

The effects of bankruptcy
Declaring yourself bankrupt is not an easy option and comes with a number of consequences. You should note that you can lose control of your assets and will be unable to obtain credit. There are also a number of implications regarding the jobs that you may have after bankruptcy. You will not be able to act as a company director or partake in the promotion, formation or management of a limited company without permission from the Court. It will also limit the ability for you to trade in any business under a different name unless you inform those involved of your current financial status. You will not be able to work as a Charted Accountant / Lawyer, a Justice of the peace or an MP. You should also be aware that your credit rating will be affected significantly for up to 6 years.