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Bankruptcy

Bankruptcy is a UK debt solution which can allow people to have their debt written off if they’re unable to repay it within a sensible time.

There are different routes to entering bankruptcy, this means criteria, cost and other factors can also change depending on a persons circumstances.

Bankruptcy should only ever be considered when all other debt solutions have been considered and aren’t going to be possible for one reason or another.

The consequences of wrongly being entered into bankruptcy are serious so it’s not something anyone should enter lightly or without understanding.

Only people living in England, Wales or Northern Ireland can enter bankruptcy, the Scottish bankruptcy equivalent is called sequestration.

Routes Into Bankruptcy

Debtor Application: The standard route into bankruptcy is an application put in by the person in debt. These forms can be found at the persons local county court where they will pay the fee and submit. The fee for most people is £750, however if they are not working it’s £525. Once the forms have been submitted the person is declared bankrupt and will be contact in the coming weeks by an official receiver.

Debt Relief Order: To help people who have debts less than £15,000 and who have low assets (less than £300) and have no property or land. A DRO will cost £90 and requires a qualified adviser to complete the appropriate forms.

Creditor Application: In some instances a creditor will pay for and apply to make a debtor bankrupt.

Consequences of Bankruptcy

If someone enters bankruptcy and it’s not the best solution available to them the consequences can be extreme, these can include,

  • Loss of Asset: If someone has equity in a property or any other asset when they enter bankruptcy the official receiver will have them sold and any proceeds paid to the debt. This has meant in the past people lost their homes, cars and more just because they entered the wrong solution.
  • Income Payment Order: An official receiver can implement an income payment order on someone, if they think there’s sufficient money to repay some or all of the debt.
  • Bankruptcy Fees: If someone is able to repay the full debt and bankruptcy fees, either by selling an asset, earning money, lottery winnings etc, they could be forced to pay the debt and fees.

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