What is Bankruptcy?
By John Mussi |
Here is a useful guide to bankruptcy. It should be noted that bankruptcy is not
to be entered into without first having sought professional
advice.
Bankruptcy is seen as the last resort. Bankruptcy is perceived to
be the only way to escape the ever-constant demands for payment by bill
collectors and credit companies alike.
Bankruptcy is not something that
should be rushed in to. Certainly there are times when it can be very useful,
but there are other times when declaring bankruptcy would be a big mistake.
The purpose of bankruptcy is to convert your possessions, and any wages
you receive, into lump sum and instalment payments for creditors. A debtors
purpose to apply for their own bankruptcy is to form a moratorium (a group of
creditors) to agree part repayment of all outstanding debts, and when the agreed
repayment has been met, to have a ‘clean slate'.
The constraints which
are put upon you once you are declared bankrupt make it only a viable option in
the most extreme of cases. It is more likely that an Individual Voluntary
Arrangement will be the answer to severe debt problems, since it provides much
of the relief offered by bankruptcy but without the severe constraints which
bankruptcy imposes.
Individual creditors cannot take action against you.
They must make a claim through the ‘trustee' (the name of the person who
controls a bankruptcy) or write off their debt.
When appointed the
trustee will advertise your demise in a number of newspapers to give all of your
creditors a chance to make a claim against the bankruptcy.
It is also the
responsibility of the bankrupt to make an honest list of all creditors: as a
bankruptcy is also a chance to start again the bankrupt should ensure every
creditor is notified. Not that a creditor could make a claim against you after a
bankruptcy, but it will get all your creditors of your back.
A
bankruptcy order takes precedence over all other forms of debt recovery. All
creditors have the right to be included in the list of creditors, and benefit
from any payment arrangement.
If you own your home you would be
fortunate to keep it. You can keep household ‘essentials' such as, bed, fridge,
heating appliances but not, TV's, video recorders, computers - unless used for
work, or used to get work.
All ‘tools of trade' are protected, but will
be scrutinized.
A bankruptcy will normally last until the third
anniversary of the bankruptcy order. During this time you are not allowed to
hold a public office, become a company director (or in all but name run a
business) and you must not apply for credit over £250 without notifying the
lender of your bankruptcy.
Your credit file will show your bankruptcy
for six years from the bankruptcy order.
About the Author
John Mussi is the
founder of Direct Online Loans who help UK homeowners find the best available
loans via the www.directonlineloans.co.uk website.
Top of Page |
