Bankruptcy will wipe out all unsecured debt excluding court fees and student loans. There are several myths surrounding bankruptcy but it becoming an increasingly popular and necessary solution for those who have no means of paying back monies owed.

Strengths: Allows a fresh start free of debt and gives peace of mind as creditors are no longer allowed to pursue the debt; if there is no equity in a property and the mortgage repayments are affordable you should be allowed to keep your home; you are also usually allowed to keep your vehicle if not on finance and worth £2000 or less. If you are a sole trader you will be allowed to keep any essential tools of the trade or vehicles should they be necessary to you maintaining an income and your employment.

Weaknesses: You are unable to get credit over £500 without disclosing you are bankrupt, your name will be added to the government’s online Insolvency Register for the duration of bankruptcy (normally one year); you cannot be a director of a company and certain other official community offices and you could be subject to an Income Payment Agreement or Order for three years if your monthly disposable income exceeds £100. £510 is payable to the court on the day of bankruptcy if you are in employment, £360 if you are in receipt of certain benefits and unemployed. Your bankruptcy may be advertised in the local press.

Real life stories

Mrs C’s problems began following her split from her husband who
remained in the marital home while she moved out with their son. As she was working she continued to contribute something towards the mortgage payments and eventually moved back into the family home after her husband claimed he could no longer afford to stay there. Within several weeks it became apparent that her husband had not paid the mortgage for six months and unbeknown to her, in addition, had taken out a secured loan to support his online gambling addiction swallowing up all the equity.

Mrs C was barely able to afford the mortgage repayments and her
unsecured debts and sought out the services of debtDr initially to put
herself into debt management but after some aggressive tactics by
creditors and a fall in her income, she was left with little choice but to
declare herself bankrupt. Fortunately debtDr oversaw the whole process, raised the appropriate paperwork and supported her throughout. Mrs C is now free from debt and feels debtDr turned the experience from what could have been a negative trauma into a positive step forward.

Mr W was a carpenter whose business had been successful for a number of years but following an amicable separation from his first wife and a downturn in business a couple of years later, struggled with supporting himself and his new wife after his maintenance payments were fulfilled and found himself turning to credit cards in order to meet normal household expenditure. Eventually he sought advice from an IVA company but found the proposed repayments would have been impossible to make. A friend recommended debtDr and following a meeting with a consultant it was concluded that as he was in rented accommodation and was unable to meet even basic standards of living on his earnings following maintenance, rent and £123,000 worth of credit card and loan repayments, bankruptcy was the best option for him in his circumstances. As in all bankruptcy cases, the paperwork was raised and the consultant attended the court hearing alongside Mr W and the telephone interview with the Official Receiver.

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