What is the Downside of Filing for Bankruptcy? 

If you have reached this part of your debt journey, then we understand how emotionally draining this experience can be. Part of coming through bankruptcy a more financially stable person is understanding and managing it with realistic expectations. We will also show some of the benefits of going bankrupt so you can find some positives despite your current struggle.

Hopefully, when you read this you will understand the consequences of declaring bankruptcy and some alternative to bankruptcy. However, through this information, you will understand what steps you can take for you to solve your financial struggles. 

Consequences of Declaring for Bankruptcy

One of the first consequences you will realise after declaring for bankruptcy is your credit score will be jeopardised for around seven to ten years. Of course, you will eventually be able to resolve it. As you can still get a good credit score back after bankruptcy. It’s just a slow process. 

Loss of Possessions you can Expect Filing for Bankruptcy 

If you own any real estate other, they are liable to be seized. This might affect those who own multiple properties that have family members living in them. If you have a property that you own that is being used for your parents or children these properties could be taken away from you immediately.

Any possessions that aren’t part of the exempt property can be taken. This means if you own a boat, second car, valuables, bank accounts and non-retirement investments. Exempt property includes the vehicle you use to get to and from work, clothing, tools needed for your work, personal belongings, retirement accounts and a portion of the equity in your home.

Declaring Bankruptcy isn’t Free

It might sound counterintuitive that to be able to file for bankruptcy you need to spend more money. To initiate the process you need to make a payment of £680. Fortunately, if you owe less than £30,000 and have no assets you could apply for a DRO. A DRO (Debt relief order) only costs £90.

The Emotional Distress from Bankruptcy 

You might feel a great deal of embarrassment since bankruptcy in the UK is public knowledge. Additionally, you could lose your business and then become forced to make your employees redundant.  

As previously mentioned, your credit score will not be the same after bankruptcy. In fact, it will stay on your credit file record for 6 years after you declare bankruptcy. 

You could Lose your Job

With some jobs, bankruptcy may lead to you losing your job or getting demoted. Here are some job titles affected by bankruptcy:

Jobs you can’t have while bankrupt

• Charity trustee
• Company director 
• Consumer credit holder
• Insolvency practitioner
• Justice of the peace
• MOT authorised examiner
• Registrar of births, marriages and deaths

Jobs you’ll be barred from if the official receiver extends your restrictions

• Magistrate 
• Members of the local or national government
• School governors

Jobs that could be affected, either being demoted or losing your job

• Armed forces
• Cash handlers, for example in banking, payroll or security
• Those within financial services, for example, an accountant, mortgage broker, stockbroker or financial advisor
• Those who work in law
• Medicine professionals
• Those who work in Property, for example, an estate agent or letting agent
• Police officers
• Pub licensee
• Security
• Self-employment as a sole trader or partnership

Benefits of Going Bankrupt

That being said, although this is the last solution to resolving debt, it is still a solution. Here are some things you can think about to help get you through the process.

​​Start Over Again Financially

Often the courts are willing to expunge any outstanding major debt you have after the 12 months of bankruptcy are over. For the payments that are still left outstanding, you will be put on a plan. If by the end of that plan you still cannot repay the debt eventually it will be wiped.

A year concerning the rest of your life is a pretty short period. Likely the stress from your debt will have bothered you for a longer period. Then, after 12 months of manageable repayments, you will be relieved of a considerable amount of stress.

You are Free from Being Routinely Harassed 

When you file for bankruptcy you will be bothered far less. This is because creditors cannot legally bother you with emails, invoices or phone calls. 

Additionally, the worst aspect of having bailiffs come to your home will be gone. Therefore, you can start to enjoy the comfort of your own home again.

Retain your Income and Belongings 

You will be able to keep some of your income from work too. Repayments are based on your current income, so you shouldn’t feel like your repayments are ever out of your control. You are only liable to repay what you physically can.

Additionally, not everything is stripped away. Anything necessary for your work or life is still yours. Typically only high-value items are seized, meaning many of your possessions will still be yours after bankruptcy.

Bankruptcy only Affects you, not your Family, Partner or Friends

As long as the debt is yours and not shared with anyone else it won’t affect your friends or family. A smart move is to transfer what you can to your partner before bankruptcy is filed. We highly recommend transferring homeownership to your partner as a means to save your home.

Alternatives to Bankruptcy 

Bankruptcy is only 1 of 4 major options available to those dealing with debt in the UK. the other three alternatives to bankruptcy to consider are an Administration order, Debt consolidation, IVA (Individual Voluntary Agreement).

Administration Order vs Bankruptcy 

• Pay your debt monthly over an agreed fixed period
• Maxes out at £5,000 worth of debt 
• Easier on your credit than bankruptcy 
• Money goes from you to the court to the creditors
• Typically the best option if you owe less than £5,000 to creditors

Debt Consolidation vs Bankruptcy

• Goes past the administration order max of £5,000
• One individual loan that allows you to pay back all your creditors 
• Helps you focus on one individual payment
• Allows you to negotiate an interest rate on one loan which is typically lower than your current debt 
• Pay it back over a specified period of time as it will never be wiped away
• Loan security is made in the form of collateral with valuable assets such as property or cars
• Easier on your credit than bankruptcy 
• Typically the best option if you owe money to multiple creditors 

Individual Voluntary Agreement (IVA) vs Bankruptcy 

• Agreement settled between the creditor and the debtor 
• The debtor pays back a certain amount of money to the creditor each month 
• You do not lose any of your assets 
• Interests on your debt cannot change while the agreement is in place
• Typically the best option for those trying to hold onto all assets they possibly can  

How can Asset Solutions help you?

At Asset Solutions, we can help you discuss ways of deciding if declaring bankruptcy is the right decision for you. We can assist you at any stage in the insolvency process. It might not be too late to get a solution to your bankruptcy.

We can discuss some alternatives to bankruptcy and work out a plan for you. Make sure you call us on 0800 689 3861, so we can solve help solve your financial issues. Asset Solutions employ professionals that are always ready to help you.