Bankruptcy
Bankruptcy is the most drastic measure of clearing off an individual's debts, and is therefore only really a last resort for people. Bankruptcy can also be enforced on an individual by a creditor issuing a petition to the court. Essentially bankruptcy wipes any unsecured debts but also causes the loss of many personal assets and ruins your credit rating.
Certain assets can be kept in bankruptcy proceedings however if they are deemed to be essential, such as a vehicle you use in order to get to work, tools of the trade and furniture used for domestic use. However, your share of the equity in your home would usually be realised. Any homeowners would always be kept aware of any action that is to be commenced.
There are also costs and court fees involved in making yourself bankrupt, you are also placed on a bankruptcy register and the bankruptcy is advertised in the London Gazette, this is to ensure that anyone you may try to get credit from is aware of the bankruptcy.
There are also certain debts that bankruptcy does not write off and continue when the bankruptcy period is over. These include any child support payment or other family court orders, any debts to secured creditors (mortgages, secured loand etc.) and also any debts from personal injury claims, fraud or other criminal proceedings.
Another option available similar to Bankruptcy, but not quite on quite as severe a scale is a Debt relief order, these wipe off any debts below £15,000 without many of the downfalls that come with bankruptcy. However, only certain people qualify for a Debt relief order, they must have minimal assets amounting to no more than £300 and have very low expendable income.
In order to qualify for a debt relief order, as well as the low assets, an individual must:
- have less than £50 per month disposable income once monthly expenses are subtracted
- live in, or have lived or carried out business in England or Wales in the last 3 years
- not be in partaking in any other formal insolvency proceedings
- had another debt relief order in the past 6 years.
- These are the main criteria in qualifying for a debt relief order.
Figures have shown that approximately 11% of Bankruptcies would have qualified for a debt relief order.
