BANKRUPTCY

Bankruptcy  the purpose of bankruptcy is to permit or allow a person to get rid of their debts and have a fresh start while at the same time repaying creditors by distributing your finances and assets.  Typically it takes about 3 months after filing for the courts to order and forbid creditors from attempting any kind of collection on debts that were owed.

Debt consolidation  Before going bankrupt consider Debt Consolidation.  Debt consolidation – is when someone merges (combine) all their various debts into the single big one.

Debt consolidation  These debts are generally high interest credit cards and other types of unsecured debt so the idea of most people is to consolidate all their debts at a smaller interest rate.

How It Will Effect Your Credit Report  Your credit reports can include information on your bankruptcy filing for as long as 10 years while it is possible to acquire credit following bankruptcy, it will be really difficult in situations.  If you begin to re-establish your credit, you’ll end up paying “high-risk” interest rates on just about everything including credit cards and mortgages.

MAIN EFFECTS OF PETITIONING FOR BANKRUPTCY

1. The risks to your current assets  with bankruptcy your assets (property, shares, anything of real value or even non-essential) can be sold to pay your creditors.  Only the property owned by the debtor (you) is directly at risk, jointly-owned property may be sold for the debtors share.  Additionally – in bankruptcy the trustee can investigate any gifts given in the last five years.

2. The risk to your future assets  when the debtor expects to receive an inheritance. Not arranging matters  as to avoid losing (such as amending a will – may be possible –but you cannot transfer property.  Attempting to run a business will be almost impossible – you are forbidden from being a company director, unless you get permission from the court.  While utilities companies cannot insist on payment, they will usually require a security deposit and insist that a prepaid meter is set up.

3. The effect on your employment or Business  There are certain jobs you cannot have if you claimed bankruptcy.  Company Director  MP (Member of Parliament)  Councillor  Estate Agent  School or College governor  Management of a charity or committee  Cannot work in a security firm  Accountant

 If the business needs credit, the requirement that you must disclose you have declared bankruptcy, will make suppliers unlikely to provide you with credit/ product.  The bankrupt order will be advertised locally, which could damage you and your business’s reputation.

 You, the debtor, cannot trade under the name other than the one under which you have made bankrupt.  If items of business, equipment, are used by your employees rather than by you personally, the trustee may still order them to be sold and this could also include any stock/ shares of your business that can be sold on your behalf.

4. Your Housing  If you had owned a home, bankruptcy will reduce your ability to own or move into another property since you may not be able to borrow money.   If you are renting it would be difficult to raise money for rent and damage deposit or any advance rental payments if money cannot be borrowed.

5. Your Reputation and Stress  As mentioned before, an advertisement will be published in a local paper, notifying people pf your bankruptcy and also inviting creditors to make claims against you.  The details can also be posted online at a Public Register.

6. It Will Cost You  There are large expenses raked up when declaring bankruptcy with the court and service fees that are applied.  Additionally, a charge of 15% will be added on all sums received by the trustee and this will be paid out of your assets.

Pros Removes the stress of dealing with creditors. Once a bankruptcy order has been made, a third party takes over the administration, decision- making and payments of your debts. Creditors will be forced to recognize that they must accept less money than what you owe. Most debts are written off and creditors cannot pursue them. But some debts, like a student loan, are not included in the bankruptcy and you must continue to pay.

Cons You will lose any realizable assets of value. If you own any part of a home, this will almost certainly be sold. If you own a business, this could be sold and your employees will be dismissed. If you rent, some tenancy agreements contain a clause stating that if you declare bankruptcy you cannot be a tenant.

Cons It can be very expensive. If you want to get credit of more than $500 you must declare your bankrupt status. You must allow all of your financial affairs to be investigated and face criminal charges if irregularities are found. Cannot hold certain jobs or trade under any other name than the one used at the time of bankruptcy. Your name will be published and your information will be made accessible to anyone in the world.

Cons The trustee must be informed of any changes in your circumstances during the bankruptcy and even after your assets may still be administered by the trustee. Certain debts cannot be written off: fines, child support, debts to secure creditors, debts from personal injury or fraud. If you are found to be blameworthy or dishonest you will have restrictions put on your bankruptcy for anywhere from 2 to 15 years.