The time to consider going bankrupt is when you realize you are unable to pay debts to creditors. It is a legal declaration for people who cannot afford to pay off their debts; and thus, it is a decision which should not be taken lightly. In the UK this process is available to individuals and partnerships only. Where a company or a corporation is unable to meet their debts, they must go into liquidation or administration instead.

Once in the process of going bankrupt, the applicant’s remaining assets are sold and the proceeds of the sale to go to creditors in equal shares to pay off as much of the debt as possible. Not all assets, however, are included in the sale; for instance, certain items that are necessary for day to day living, and also a tradesman’s tools. 

If you are thinking about filing bankruptcy, contact one of our insolvency solicitors who can advise you based on your individual circumstances. Before doing this; however, keep in mind the following prerequisites must be met:

1.  You must be a UK passport holder with a correspondence address in the UK;

2.  Most of the debts must have been incurred while living in the UK;

3.  The Applicant must be able to pay the Court fees associated with the proceeding.

There are advantages and disadvantages to claiming bankruptcy in the UK. The main advantages are :

• Once you are declared to be bankrupt, the status is legally binding and creditors cannot start an action against you;

• 12 months after going bankrupt all debts are written off; and you are deemed to be debt free;

• Once the process is complete you will have a fresh financial start.

The main disadvantages are:

• You lose control of all of your assets;

• All of your valuable assets including your home will be sold and the proceeds will go to pay off as much of your debt as possible to creditors;

• Your bankruptcy will be advertised in the newspaper;

• You cannot act in certain capacities; for example, you cannot act as a company director or work as a local government councillor;

• Your credit rating will be affected for 6 years after you go bankrupt.

To discuss the best options with respect to your particular set of circumstances, be sure to speak to your insolvency solicitor who will be able to offer you further advice.

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