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What Is Bankruptcy?
When an individual is unable to pay their creditors bankruptcy is an option that can be considered to help resolve them from overwhelming debts. It is a way of helping them get back on their feet and make a fresh start.
Bankruptcy, often described as the solution of last resort, is the most severe form of dissolution and it is important to consider all other possible avenues before entering into it.
Debtors can enter into bankruptcy voluntarily should they feel there is no other option and wish to come to an agreement with their creditors to pay off some of their debts. Bankruptcy can also be declared by creditors who wish to recover part of the funds owed to them.
Once a debtor has entered into bankruptcy they are legally ‘in a state of bankruptcy’. It is usually individuals who will enter themselves into voluntary bankruptcy first.
Why Do People Enter into Bankruptcy?
The reasons that people enter or are entered into bankruptcy are:
- Attempt to come to a legally mutual agreement with creditors to pay off some of the funds owed to them
- Enable those who have found themselves in a great deal of debt to start over with a clear conscience
Is Bankruptcy Right for me?
- If your debts are greater than your income you may wish to find out more about bankruptcy
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- You have ownership of your property? Do you own any other valuable assets?
- You see your financial situation improving over the coming months?
- You think that you will be able to pay your debts off within the period stated on the contract?
If you found you have answered no to these questions bankruptcy may be an option for you.
The advantages of bankruptcy
- You will be protected against legal action from your creditors
- You will be debt free after the term of your bankruptcy
- Dealing with your debt problems will take a huge weight off your shoulders
- All outstanding debts that you have not paid after the term of your bankruptcy (usually 12 months) will be written off
- When the bankruptcy term is finished you can look to making a fresh start with no debts to worry about
The disadvantages of bankruptcy
- You will be restricted from employment in certain professions, i.e. a Company Director or a government councillor
- Your bankruptcy will be registered and publicly viewable in certain newspapers and on the bankruptcy register
- You will lose control of your valuable assets such as your home and they will be sold and distributed amongst your creditors
- You’ll find it very difficult to obtain credit for over £250
- You will be involved legal proceedings and your credit rating will be adversely affected for 6 years
If you’re considering bankruptcy you need to seek professional advice and assistance before taking any action. You need to think carefully about the affect it will have on your life now and in the future. There are several alternative debt solutions that you might find just as useful and that may not have as many severe consequences.
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