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What is bankruptcy?

Bankruptcy is a debt solution suitable for people who cannot pay outstanding bills to their creditors on time. When an individual’s total debts are bigger than the value of their assets, they will be deemed insolvent and in a position to apply for bankruptcy.

If you declare yourself bankrupt, you are confirming that you are no longer able to pay your outstanding debts. You can then enlist a trustee to take on the responsibility for your debt repayments. This trustee will either be an Official Receiver or an Insolvency Practitioner.

 

What’s the minimum amount of debt needed to go bankrupt?

The minimum amount of debt required to be eligible for bankruptcy is £5,000. It’s highly advisable that you speak to an FCA-regulated debt adviser before applying for bankruptcy, as there could be a more suitable debt solution for you.

 

Does it cost to go bankrupt?

It does cost to go through bankruptcy proceedings. You’ll need to pay an upfront fee of £680 before your application can be processed and moved along through the courts.

If you cannot afford this fee, you may find it difficult to proceed with bankruptcy. However, there may be a charity or grant support that may be able to help you. You may also be able to pay the amount in installments, to help make the process more affordable.

 

Does going bankrupt have advantages?

Bankruptcy may be a faster way to pay back your debts, meaning the majority could be written off within a year. This would leave you in a position to make a fresh start, as all of your creditors would have been paid as much as possible.

 

Does going bankrupt have disadvantages?

If you are declared bankrupt, this will have a detrimental effect on your credit rating. For six years after the date of your bankruptcy order being made, you will find it difficult to borrow money at a competitive rate of interest. To pay back your creditors, your valuable possessions may be repossessed and sold to raise funds.

 

Find out more about the advantages and disadvantages of bankruptcy here.

 

Seek professional advice today

If you are wondering what the best debt solution is for you, or if you just need some advice, call the team at PayPlan today. You can reach them on 0800 316 1833 .