Should you be considering bankruptcy?

You can only declare yourself bankrupt if you don’t have enough money to cover your living expenses (within reason) and your debt repayments. Thus, the total amount of your assets is less than the total amount of your debt. If the equity you own in your property is greater than the amount of debt, then you should generally avoid bankruptcy and may wish to consider an IVA.

If you’re a Lawyer or you’re employed within the Financial Services industry, bankruptcy could probably cost you your job. You won’t be able to become a Member of Parliament or member of local government while you’re bankrupt either. It’ll have an adverse effect on your career progression if you’re in organisations like the Police Force or Armed Forces too. You really have to discuss your circumstances with your HR or personnel department, as they should be able to shed some light on the possible ramifications at your place of work. You’ll need written permission from the Courts to act in a management capacity within a limited company and you’re entirely forbidden from operating as Director of a limited company. Obviously, if you currently hold any of these positions, consider your options carefully before declaring yourself bankrupt.

Before deciding to declare yourself bankrupt, it’s advisable to exhaust other, more informal debt solutions, like a debt management plan. In some cases, even those who are eligible for an alternate debt solution could still decide that bankruptcy’s their best option. This might be a pensioner or other person who’s living on the benefit system. They’ll could find themselves better off financially if they declare themselves bankrupt. Similarly, you might opt for bankruptcy over an IVA because you’ve no significant assets to lose, your job’s not affected, or you’re not too bothered about a bad credit rating. There’s the stigma of having your name in the papers to consider too.

Another consideration is the effect of bankruptcy on your partner of spouse. If you’ve kept your finances separate, it’s not going to affect them directly. Any assets in their name can’t be taken into account. However, any third party living at your address has the potential to experience problems with their credit report. It is, regrettably, quite common for bad credit information to bleed through from one person’s file to another’s, particularly when sharing a common address. The only way to stop this happening is for the third party to contact a credit reference agency and apply for a disassociation. This simply means that the debtor’s information will be removed from their file and vice versa.

Bankruptcy has its positives and negatives and they essentially boil down to the following:

The case for Bankruptcy

• You’re absolved of all debt.
• Bankruptcy restrictions will typically be lifted after a year if it’s your first time and, aside from Student Loans and other specific debts which cannot be included in bankruptcy, outstanding debts should be written off.

The case against Bankruptcy

• Details about your bankruptcy will be published in the newspaper.
• Your credit rating takes a heavy blow that stays on file for six years.
• It could cost you your house and assets.

There’s no right or wrong here though. It boils down to personal circumstance so get some professional advice and review all of your options before making a decision.