The unknown is always a bit scary. You do not know what to expect, what will happen, and what the future may hold.
When you are in debt, struggling with the bills, juggling who to pay, or not being able to pay anything at all, the great unknown of bankruptcy may seem a bit scary as well.
So what happens when you go bankrupt?
What is bankruptcy like?
While we can explain the process and what happens when you go bankrupt here in the UK, how each person handles it, is an individual matter.
I can say/write, that many of the people who I have spoke with over the years have felt a sense of relief. The reason for that relief is due to the fact they have struggled with their debts for years, and bankruptcy gave them the light at the end of the tunnel.
Bankruptcy gave them a fresh start, a new beginning financially, and removed all the stress they had been experiencing.
The Process of Going Bankrupt
Of all the ways to get out of debt, bankruptcy is the quickest; literally in a matter of moments your creditors need to cease contact with you, and within 12 months you are debt free and starting over.
There is a price for this debt freedom, of which we will discuss in more detail soon.
The actual process of going bankrupt is fairly straightforward:
- You need £20,000 or more of debt.
- You need to pay the fees to go bankrupt, which are currently £680…of which you can pay in instalments, but you are not made bankrupt until you pay the full amount.
- A judge reviews your petition, and declares you bankrupt. You do not need to attend the court hearing.
- An Official Receiver is appointed to review your finances and to see if you have any assets that can be sold/liquidated to pay into the bankruptcy to your creditors. The OR also looks to see if you have any surplus income after your allowed living expenses to pay into the bankruptcy. If you do show any surplus income, you can be required to make payments into the bankruptcy for a period of three (3) years.
- You are discharged from bankruptcy after 12 months, and all your debts are gone, you no longer owe them.
Of course there can be more details, concerns, and complications, but if you own no property or other assets, the debts are in just your name, and you have no surplus income, that is it, the process.
While this sounds and can be a simple process, it is also a legal matter, and a serious matter.
When you go bankrupt you are stating that you can no longer handle your financial affairs, and need help; you need the court’s assistance. In asking for that assistance, you will pay a price, the price not just of the fees to go bankrupt, but to have your finances reviewed, and any assets possibly sold off.
You will also have your credit affected by going bankrupt.
The Aftermath of Bankruptcy
The aftermath of going bankrupt can be a sweet and sour thing.
You are debt free, out of debt, no more stress about your debts, however, your credit file is affected.
Everything stays on your credit history for a period of six (6) years, and so does bankruptcy, and this does affect your credit score.
So you may ask yourself, does this mean I will not get credit for 6 years? No, it does not. It does mean that initially it may be difficult to get credit, but you can and will get credit again in the future.
It just takes time, and by following a few tips.
More on the “tips” later.