Bankruptcy can be scary, especially for the people involved. Although it’s a word that many people in dire financial trouble find unappealing, sometimes it’s the quickest, cheapest and easiest way to get back on your feet.
There are many false myths surrounding bankruptcy, which deter people from researching and applying for it. Bankruptcy does offer some advantages if you’re unable to meet your bills or pay back your debts in time, so here’s a list of home truths to dispel those scary rumours.
My name will be in the paper!
Years ago, newspapers and other publications used to have a section listing all the people who had been declared as bankrupt. This wasn’t there to name and shame people that got into financial trouble, but instead to inform creditors and lenders.
Nowadays, your bankruptcy will only be mentioned in the papers if it is a matter of public interest. It will be mentioned in the London Gazette but this is a trade paper and available to creditors all over the UK. Your bankruptcy will become a matter of public record, meaning that people can find out about it online, however, they would have to specifically search for you in order to find this out.
I’ll lose everything!
It is true that some bankruptcies will result in the loss of a home and other assets, but only a small percentage. If your property has negative equity, the changes are that you’ll be able to keep it.
By applying for bankruptcy, I won’t have any more debts!
This is not true. You might be required to pay your surplus income into the bankruptcy for a maximum period of three years. The more surplus you have at the end of each month, the more you will have to pay, however if this figure falls below £20 then you should be able to keep it.
Creditors have the power to make me bankrupt!
This is not true, however if you have broken your credit agreement, they are able to petition for your bankruptcy through a statutory demand. Always seek professional advice if you are issued with one of these demands, as many are issued as a scare tactic to get you to repay your bills.
I’ll be bankrupt forever!
As we said before, applying for bankruptcy is the quickest and cheapest way to get rid of your debt. However it won’t last forever! A large percentage of bankruptcies only last for 12 months, although it will be listed on your credit report for a minimum of 6 years. Furthermore, it will stop you from taking out any future credit, and will inform banks and other lending institutions that you’re a high risk to lend to.
I’ll be dragged in front of a judge!
There will be no audience, and no screaming judge! The process is completed in your nearest county court, and in the judge’s chambers away from the eyes of the public. It’s the judge’s responsibility to make sure that you’re aware of your actions and that you’re properly advised into the next stages of bankruptcy.