In this post I look at the Pros and Cons of Bankruptcy. Bankruptcy is another solution you can use to sort out your debt problems.
Bankruptcy is usually only helpful in certain circumstances. Used incorrectly, it could cause you more problems than it solves.
It is certainly worth considering all the available options before selecting Bankruptcy as a solution to your debt problems.
Let’s take a look at the pros and cons of Bankruptcy.
The Pros of Bankruptcy
1. Limits the amount of time you spend paying off your debt.
2. It is legally binding. You shouldn’t receive any further contact from your creditors once the Bankruptcy is finalised.
3. Provides you with peace of mind. You will know that you are taking control of your debt problems.
4. Once the bankruptcy is completed, all debts are written off. Depending on your own situation, this could be written off after a year.
The Cons of Bankruptcy
1. You may lose your home or other assets apart from those required for a basic standard of living.
2. You cannot act as a company director.
3. Your financial and personal details may be examined in a court.
4. It will be very difficult to obtain credit. Applications for credit over £500 will require permission from the lender.
5. If you are an accountant or lawyer, you will not be able to continue in the profession.
6. It can cost £700 to declare yourself bankrupt.
7. You will usually lose the use of the bank account you have. You would have to open a basic bank account with no overdraft and limited facilities.
8. You are subject to the control of the court.
9. If it is found that you have acted recklessly or dishonestly, further restrictions can be imposed on your bankruptcy discharge.
10. Any income you receive apart from what is required to live on will be used to pay off your debts.
11. Your Bankruptcy will be advertised in the local news papers.
It is certainly worth discussing Bankruptcy with a qualified professional as it is a drastic step. Bankruptcy is only suitable in very specific circumstances. As mention above it could cause you more problems than it solves.
There are other options available to you to tackle your debt problems. If you would like to find out about other debt solutions, please read my post on getting out of debt to find out more.
To see a list of organisations who can help you, please visit the helpful links section of this blog.