At first glance, bankruptcy may appear to be an easy way out of debt problems, but is it the only answer? What is the real cost of bankruptcy? Before considering bankruptcy, there are a multitude of factors that must be considered, many of which are best explained by a specialist debt management company.



The process of going bankrupt is actually quite simple:

• Complete declaration forms available from your local county court.

• Provide details of all assets you own and all debts you owe.

• Pay the associated court fee and administration deposit.

Bankruptcy can be a same-day service! But should you consider it at all?

Following the above steps, you will be issued with a Bankruptcy Order. You will then need to meet the Official Receiver in your area. Their role is to review your circumstances and ensure you meet the conditions of the bankruptcy. This will involve discussing your debts. Once the bankruptcy takes effect, you will be unable to acquire any other kind of debt solution, such as debt management, a consolidation loan, or an IVA.

The duration of bankruptcy usually lasts one year. In 2004 this was reduced from three years. Once you are discharged from your bankruptcy you are able to start again debt free.

Sounds easy doesn't it? Many people think it is an easy option for those in serious debt. However, the negative, long lasting consequences of bankruptcy need to be taken into account as they can have a lasting impact on your life.

You and Your Home

The trustee associated with your bankruptcy has three years to deal with your home or any property you own. During these three years the trustee can:

• Put your property up for sale.

• Have a charging order issued. This means that any money generated by the property, through rent or sale, will got to the trustee.

• Arrange terms for you to buy the trustee's interest in the property. These terms can be arranged with those with whom you share ownership of the property.

Your bankruptcy terms usually last one year. However you are at risk of further action, in terms of your assets, for a further two years. Many people forget that after the expiration of their bankruptcy order, their home, or their share of it, remains in the hands of the trustee.

At worst this can mean your house is sold regardless of your bankruptcy status. The consequences of this can be devastating for your family. As mentioned above, this can also be the case if you own a share in a property.

Bankruptcy Restriction Order (BRO)

A BRO is an extension of a Bankruptcy Order that can be imposed on the debtor at the end of the bankruptcy terms, which is usually one year. A BRO is issued if the Official Receiver deems that the debtor has been irresponsible during the terms of their bankruptcy.

Examples of irresponsible behaviour could be:

• Gaining more debt during their bankruptcy period.

• Gaining more debt with the intention of applying for bankruptcy.

• Selling assets and giving the money to family members.

Consequences of a BRO

• You cannot be a director of a company.

• Creditors must be made aware of your bankruptcy status if you apply for credit for more than £500.

• If you are trading you have to inform those you trade with about your bankruptcy status and the name you traded under when declared bankrupt.

• These restrictions can last between 2 and 15 years.

Bankruptcy can be seen as an easy solution to debt problems, but many problems can result. Whether or not bankruptcy is right for you depends largely on your own unique circumstances. Sure you seek advice from a debt management professional before you go ahead.