Personal Bankruptcy is a form of insolvency and often viewed as an extreme way of managing debts. It’s a legal procedure mainly suited to people who have personal circumstances that are unlikely to change. Individuals considering bankruptcy often have little hope of paying off their debts within a reasonable time. In Scotland, the equivalent is known as Sequestration.
How Does Personal Bankruptcy Work?
Personal Bankruptcy is typically normally only suitable if you can’t pay back your debts in a reasonable time. Any assets you own, such as your house, will usually be sold to pay off your personal debts. Therefore, if your assets are worth more than the sum of your debts, or if all of your regular payments are up to date and you can afford to keep paying them, bankruptcy is unlikely to be the best option for you.
However, when you declare yourself bankrupt almost all of your unsecured debts are written off, allowing you to make a fresh start. Personal Bankruptcy rules mean you will face certain restrictions. There are alternative solutions that can help you achieve the same goal of starting to become debt free such as a Individual Voluntary Arrangement, Debt relief Order or Debt Management Plan.
Personal Bankruptcy - Pros and Cons
Personal Bannkruptcy is available for residents in England, Wales and Northern Ireland. In Scotland, the equivalent is known as Sequestration
Your unsecured debts will be written off, giving you a fresh start
You won’t receive any further contact from your creditors
Your creditors can’t take any further legal action against you to recover your debts
Assets such as your home or vehicle may be included in your bankruptcy
Bankruptcy will have a negative impact on your credit file and appear on it for six years
Some jobs are affected, such as legal or financial roles