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One method of dealing with debts you can no longer
manage, is by declaring yourself bankrupt. However, bankruptcy is not
an initiative which should be taken lightly. Bankruptcy is a serious
matter which will have an effect on the way you are dealt with by the
creditors you wish to establish a relationship with for several years
following your discharge.
Bankruptcy isn’t a fun thing to do or an easy way out for people who are
buried in debt. It is a way to come in aid to people who just can’t get
themselves out of debt and can’t get the help that they need. How it
basically works is that you declare yourself bankrupt and the government
then covers your debt and renders you as ‘broke’ to your creditors. This
inevitably implies that your record will show that you couldn’t pay your
debts. This makes it very difficult for creditors to put their trust in
you.
Recent Bankruptcy modifications
The bankruptcy laws were modified in April 2004, and these modifications
made it more easy for people to declare themselves bankrupt by minimizing
the time it takes to get rid of bankruptcy from three years down to one
year or less. This change was supposed to support people and help them get
back in order again. For private individuals; which are those who don’t run
businesses, the effects of personal bankruptcy can be much harder to
handle.
Bankruptcy Advantages and Disadvantages
The truth is that you mustn’t declare yourself bankrupt just because you are having trouble paying your debts. As mentioned above, bankruptcy should be your last possible resort. This is due to the fact that you might have to give up most of your possessions as a result. Some of these possessions might comprise; salary as well as investments in your house.
If you own any property or shares in businesses they might have to be sold in order to pay back the money that you owe as well. This entails that your bankruptcy could make you lose you or your family’s house. Even if the house is jointly owned by you and a spouse or parent, you could be forced to sell it so that your share of the proceeds can be used in order to repay debts.
Under new rules however, if the trustee that the court appoints hasn’t sold the bankrupt person's home within three years, it will no longer count as part of the estate and might not be reclaimed by you. Don’t hold your breath, however, because this is not all you could lose either. If you make any money whilst the bankruptcy order is still in place, it could also be withdrawn from you. This money could come from the lottery, or an inheritance for example. Obviously, you could also find your credit blacklisted for up to 15 years. So bankruptcy is really an initiative you will want to consider very carefully before you start.
Interested? Click to go to the next page of our guide: Getting to Grips With Bankruptcy 2
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