Bankruptcy is a way of dealing with debts in which the court makes a bankruptcy order against a debtor who is unable to pay their debts. A trustee is appointed to take over the management of the debtor’s financial affairs for a limited period and to use the debtor’s available income and assets, if any, to pay the creditors. The trustee is either the Official Receiver or an insolvency practitioner. Once a debtor has been made bankrupt, they have a duty to co-operate with the trustee and make full disclosure of all their financial affairs.
When the debtor is discharged from bankruptcy the money owed is usually written off. In most cases, this can be after only one year.Creditors have to stop most types of court action to get their money back following a bankruptcy order.
However, there are disadvantages to going bankrupt, including the cost of up to £700, loss of your home if you own it and loss of other valuable possessions too. Your credit rating will be affected.
It is important that you seek full debt advice on all of your options, including full implications of bankruptcy and how this will affect you, before deciding on this action.
Advice Guide: Bankruptcy National Debtline: Bankruptcy Factsheets BIS: Guide to Bankruptcy