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UK
Personal Bankruptcy Facts
Bankruptcy is brought about when an individual is unable to manage their bad debt
problems.
A voluntary arrangement is a contract between you and your creditors to settle
outstanding debts.
One way to avoid the threat of voluntary arrangements or bankruptcy is to enlist
the services of a debt management company. |
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UK
PERSONAL BANKRUPTCY
What
causes bankruptcy?
Bankruptcy
is brought about when an individual is unable to manage their debt.
For a debtor or creditor to apply for a bankruptcy order, the debt
must be at least £750 and not be disputed by either party.
The
most common way to bring on bankruptcy is to plead ignorance. Instead of
dealing with debts and creditors, doing nothing to arrest your debt
problems will almost inevitably lead to personal bankruptcy.
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What
is personal bankruptcy?
Personal
bankruptcy is the bankruptcy of an individual.
Contrary
to opinion, the aim of most creditors is not to make an individual bankrupt;
creditors who speak of bankruptcy usually do so as a tactic to scare you
into repaying your debt. Creditors don't want to bring bankruptcy
upon you because there is very little in the way of compensation for an unsecured
creditor in a bankruptcy (i.e. they will never regain the majority of your
debt).
Typically,
a bankruptcy will be petitioned by a Government service or by the debtor
themselves, as a means of ending the nightmare of bad debt problems.
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What
is the purpose of bankruptcy?
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'.
A
bankruptcy order means that an individual creditor cannot make a claim
against you, all claims must be made via the trustee (the person who controls
the bankruptcy), otherwise the debt is written off.
A
bankruptcy will normally last until the third anniversary of the bankruptcy
order. During this time you cannot hold public office or be a business director
and you cannot 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.
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Is
a voluntary arrangement an alternative to bankruptcy?
A
voluntary arrangement is a contract between you and your creditors, where
you pay a monthly sum over a set period. The total is divided up between your
creditors, who accept this sum in settlement of your present debt.
The
advantage of a voluntary arrangement is that settle your debt problems
without having to declare bankruptcy. A voluntary arrangement is legally
binding too, meaning that once the agreed terms have been satisfied you have no
further obligations to your creditors.
Unlike
bankruptcy, a voluntary arrangement does not affect your employment or
business status and is not widely advertised.
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How
can I avoid bankruptcy?
If
you have bad debt problems and are heading towards bankruptcy one
solution is to enlist the services of a debt management company.
A
debt management company will evaluate your personal finances and debts
and develop a financial plan that not only repays your debts but also allows
you to live a reasonable life.
Successful
debt management can help get your finances on track and stave off the threat
of voluntary arrangements or bankruptcy.
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