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  • What is bankruptcy?

  • It's a legal process in which your unmanageable unsecured debts are written off by a County Court.

    It involves handing over rights to your affairs (i.e. your debts) and any assets (e.g. your home, if you're a homeowner) to a Trustee, who is responsible for ensuring that your assets are shared out fairly amongst your lenders.

    On successful completion of your bankruptcy (normally after a year), you will be 'discharged' and your remaining debt will normally be written off.

    Depending on your situation, you may be required to make monthly contributions towards your debts for up to three years.

     

    What does bankruptcy cost?

    At the time of writing (June 2011), there is a court fee of £175 plus a debtor's petition fee of £525 - £700 in total. However, the £175 can sometimes be waived if you are on a very low income.

     

    Is bankruptcy right for me?

    Although bankruptcy is often considered a last resort for tackling debt, it can actually be the right solution for some people. However, you should always discuss all your options with an expert debt adviser before you decide on anything.

    There are a number of alternative debt solutions that could help you avoid some of the disadvantages of bankruptcy.

     

    Disadvantages of bankruptcy

    Like any debt solution, bankruptcy has a few disadvantages. These include:

    • Likely repossession of your home (if you're a homeowner)
    • Impact on your credit rating - records remain visible for six years after the order is made, and your ability to obtain credit may be affected for longer
    • You may be required to make monthly payments towards your debts for several years after you have been discharged

     

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