What do you think when you hear the word bankruptcy? Financial ruin? Everybody knowing about your debt? For lots of people, bankruptcy has some very negative connotations – but do you know what it really means?
Bankruptcy is a debt solution designed to provide a lifeline to people who are insolvent. If you’re insolvent, it just means you can’t afford to pay your debts back or that your debts amount to more than the value of everything that you own.
• Will it last forever?
If you think bankruptcy lasts forever, you’d be wrong. Bankruptcy officially lasts for a year – the only time that it lasts longer is if you break the rules of the solution and your bankruptcy restrictions are extended.
During bankruptcy your unsecured creditors are not allowed to chase you for payment. You may have to pay something towards your debts for three years, but only if you can afford to.
After your bankruptcy ends, the rest of your unsecured debts are written off, giving you a fresh start and a chance to rebuild your finances. It will also have a negative effect on your credit history for six years from the date that you start the solution.
• Will I lose my home?
In some cases you will have to sell your home if you go bankrupt, but this isn’t always true. If you have negative equity then you won’t be expected to sell your home.
You also won’t be expected to sell your home if you have to live in a certain area, for instance, if your children need to go to a specific school nearby, or your house has been modified to help with a disability.
If you do have to sell your home, but you have dependents living with you, you may be able to put the sale off for a year while you make other living arrangements.
• Will everybody find out?
Back in the day, if you went bankrupt, it would be advertised in the local paper. Luckily, this very rarely happens now. You may have heard that it will appear in the London Gazette and this is true – but this is a trade paper mainly used by creditors for business purposes.
It’s very unlikely that everyone in your life will find out if you go bankrupt. It’s possible for them to find out – your name will be added to the Individual Insolvency Register which anyone can search. However, this register is mostly used by professionals dealing with bankruptcies. Your family, friends and employer would need a reason to actually go searching for your name.
• Getting help with debts
Bankruptcy has some serious consequences, like possibly losing your home and damage to your credit history, however it can sometimes be the best option for someone battling unmanageable debts. So, it’s important not to let fears that might not be true stop you from starting the right debt solution.
Bankruptcy isn’t the only debt solution available – be sure to get in touch with a trained debt advisor or the Money Advice Service to find out which one is right for you.
Debt Advisory Centre: 0161 871 4881