Bankruptcy was once the domain of unsuccessful self-employed business people and sole traders. However, in recent years there has been a significant increase in the number of employed individuals who have applied for bankruptcy. This is normally caused by unmanageable personal debt.



During times of high employment levels and low interest rates the cost of borrowing is normally low. Individuals often borrow excessive sums of money during these times through credit cards, personal loans, mortgages etc and when interest rates subsequently increase they are unable to keep up with the payments on their loans. This can lead to bankruptcy in the same way as running a business that fails. Bankruptcy orders can be given for as little as seven hundred and fifty pounds.

In addition to the number of individuals who are now applying for bankruptcy there is an increase in the number of people opting for a Personal Individual Voluntary Agreement (IVA) as a way out of spiralling debt problems. This is an arrangement which can help an individual to clear their debts over an allotted period of time without their creditors breathing down their necks demanding payments.

Both of these situations can make it more difficult to find a mortgage once the bankruptcy and IVA commitments are completed.

However, it is not impossible, and making regular payments towards an adverse credit mortgage can help to repair an adverse credit history. While it is possible to achieve this, it should be noted that fully repairing an individual's credit file after a period of bankruptcy will take many years. It is certainly no easy solution to solving debt problems.

Historically, bankrupts were required to spend three years in bankruptcy before being discharged and being in a position to apply for credit again. These days the time required to remain in bankruptcy has been reduced to one year. After being discharged, former bankrupts will be eligible to apply for an adverse credit mortgage. Because of the individual's history of mismanaging debt, interest rates and other fees and charges attached to the adverse credit mortgage will be high.

Even if the individual keeps up with their repayments for several years and does not incur any more credit impairments they may still never be able to apply for a high street product again. Bankruptcy is probably the worst form of credit impairment so it can be nearly impossible to recover from.

The adverse credit mortgage market is highly specialised and there are many different lenders specialising in various niche markets. It is difficult and time consuming to research the market alone. It is therefore advisable to contact an independent mortgage adviser who specialises in adverse credit mortgage products when discharged as a bankrupt if searching for a mortgage to finance the purchase of a property.