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What is Bankruptcy?
Bankruptcy Advantages (Pros)
Removes the uncertainty and stress caused by dealing with numerous creditors.
Once an order is made, a third party takes over the administration, decision making and payment process of the debts.
Should the debtor live in rented accommodation and have rent arrears, this could put the home at risk if the landlord considers those arrears are unlikely to be paid. In this case he could commence possession action. Also, some tenancy agreements contain a clause stating that an un-discharged bankrupt cannot be a tenant. .
Bank current accounts can be difficult to obtain (Unlike with
Debt Management Plans and IVAs)
Debtors typically pay less with a bankruptcy order than with an
IVA.
Creditors forced to recognise that they must accept less money than is owed.
Certainty that creditors cannot change their minds and that once it is in place creditors take little interest in the debt.
Once discharged, most debts are written off and creditors cannot pursue them.
Some debts, such as Student Loans Company debts, are not included in bankruptcy.
For those debts the bankrupt will continue to owe them even once they have completed their period of
bankruptcy and have been discharged.
Bankruptcy Disadvantages (Cons)
The debtor will lose any realisable assets of value. Though they may not be sold until immediately and,
perhaps, not even until after the bankrupt has been discharged.
If the debtor owns equity in a home, this will almost certainly be sold.
(Unlike with a Debt Management Plan
and IVA)
Can ultimately be expensive. All fees for the insolvency service,
courts and any trustee are taken out of the debtor's assets.
There is a 15% levy on all sums received by the Official Receiver/trustee.
If trying to obtain credit of more than £500 (including ordering goods and then not paying for them on delivery)
the debtor must disclose his status as an un-discharged bankrupt.
The debtor must allow all his financial affairs to be scrutinised, and can face criminal charges if irregularities
are found.
Cannot hold certain public offices, such as MP, councillor or magistrate, or practice certain professions,
such as solicitor and accountant.
Names of those made bankrupt are published in the London Gazette and the local press and can be viewed online at
the Insolvency Service website, making them accessible to anyone in the world.
The trustee must be informed of any changes in circumstances during the bankruptcy. Once discharged
from bankruptcy, the debtor's assets may still be administered by the trustee/Official Receiver.
Certain debts cannot be written off: fines, maintenance/child support payments, other family court orders,
debts to secured creditors, debts from personal injury claims, debts incurred through fraud, debt arising from certain other
orders of the criminal court.
Bankruptcy does not affect the rights of secured creditors.
Where there are joint debts, creditors can still pursue the non-bankrupt debtor.
Bankrupts found to be blameworthy, culpable or dishonest can be made subject to a Bankruptcy
Restrictions Order which can impose the same bankruptcy restrictions, plus some additional ones, for anywhere
from 2 to 15 years.
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