What is Bankruptcy?

Are you have trouble paying back the debts that you owe? When you are in debt, you can struggle to see a way out. You can be stressed about how this debt is going to affect your daily life, including looking after your loved ones.

But it is important to understand that bankruptcy can be a process that helps you in the long run. In fact, it can give you the fresh start that you need to move on and progress.

What is Bankruptcy?

Bankruptcy is when you cannot pay off your debts that you owe. During this process, you are able to write of all your debt by having assets taken from your possession and putting them toward paying off this debt. You can only be declared bankrupt if the debts you have amount to over £5,000. Of course, bankruptcy should only be chosen as a last resort and it is not a process that should be taken lightly.

Your possessions will be valued and this amount will be shared out to those you have a debt with. For example, this will include valuing your car, jewellery and house. You are only able to keep the essentials during bankruptcy. This will mean that you lose some possession that you care about. However, this is going to help you on the road to being debt-free. In addition, you may have to make payments to pay off your debt for up to three years. This is going to depend on your income, as well as your situation.

A lot of people are worried about losing all of their possessions during bankruptcy. However, the good thing is that once this is all done, you will not have to deal with the creditors you owed money to anymore. Instead, you are free to start again without having any debts.

Will Everybody Know About Bankruptcy?

A lot of people worry about everybody finding out about their bankruptcy. The bad news is that it will appear in the London Gazette. This means that people you know might find out that you have been declared bankrupt. However, if your bankruptcy is not public concern or big news in your area, it is unlikely to appear in your local newspaper. Therefore, it is more likely that people will find out if you tell them.

Of course, there are going to be organisations that know about your bankruptcy. This is going to include banks and building societies, utility supplies, landlords and local authorities.

Starting the Process of Bankruptcy

There are two ways that can start the process of bankruptcy. One way is if a lender that you have a debt to applies to make you bankrupt. You do not have a say in this process and lenders do this if they want to recover the money that you owe them.

The second way is by voluntarily declaring yourself bankrupt. You are able to do this online on the Government’s website and this puts you in control of the situation. Prior to applying for bankruptcy, it is best to seek legal advice. This is going to make sure that you are making the right decision for your situation.

During the application process, you will have to detail all of your debts and outgoings. In addition, you will have to provide information on your income. An official adjudicator will review your application and decide whether you can be declared bankrupt. Normally, you wll know within 28 days.

You Can Still Rebuild Your Credit Report

A lot of people think that once they declare bankruptcy that it’s the end of the road. They won’t be able to borrow again and their business will be destroyed. When you are declared bankrupt, this will stay on your credit report for six years. However, this isn’t necessarily true. There are ways that you can rebuild your credit report after you declare bankruptcy.

First of all, ensure that your credit score is correct. Order a copy of your credit report and take a look at all the details. If there are any mistakes, make sure that you raise this as it can affect your score. In addition, you can make sure you’re on the electoral roll and all your personal details are correct.

If you need credit, the best thing you can do choose an option for people with a low credit rating. You will have to pay high interest rates but this means that you can enjoy credit. By paying all of your instalments on time, you can boost your credit score over time. In addition, spread out your applications so that minimal checks are carried out on your report when you need credit. Avoid applying for credit that you don’t think you’ll get to avoid further checks that are not necessary.