How do I go bankrupt

What is Bankruptcy

Bankruptcy is often a consideration for any individual or organisation that is unable to repay outstanding debts.

Becoming bankrupt will result in:

• Your creditors writing off your unsecured debt.

• Your remaining assets being distributed across any outstanding creditors.

•A trustee being appointed to manage your finances for a certain period.

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When to declare bankruptcy

If you are in a lot of debt which you cannot possible repay and you are unable to raise the money to pay your creditors by selling your assets you might start to consider bankruptcy.

But before you do you should consider the pros and cons of bankruptcy and the alternatives available!



Benefits of declaring yourself bankrupt

The benefits of bankruptcy are:

•All of your debts will be written off

•A trustee will be appointed to deal with your remaining creditors •Your creditors will be forced to accept reduced repayment



Drawbacks of declaring yourself bankrupt

There are however many drawbacks to bankruptcy:

•You will lose any assets of value

•If your debtors hold any equity in your home it will likely be sold

•If you own a business it will be sold and your employees dismissed

•Your credit rating will be severely damaged

•All insolvency costs (which can be considerable) are taken out of your assets



Drawbacks of declaring yourself bankrupt

More drawbacks to bankruptcy:

•You must disclose your status as bankrupt when trying to obtain credit in the future

•Loss of financial privacy

•Your name will be published in a public bankruptcy list

•You will not be able to hold a number of public or trustee offices

•Some types of debt cannot be written off



How to avoid bankruptcy

There are a number of ways to avoid bankruptcy and alternatives to consider in a tight spot.

•Create a budgeting plan

•Debt management plans

•Debt consolidation loans

•IVA



Create a budgeting plan

Seeking free professional debt help and advice can help you clear your person debt without you having to cut down on the things you and your family needs.

By maximising your income and minimising your unnecessary outlay you may be able to turn your finances around.



Debt management plans

A Debt management plan is an arrangement that you can make with your debtors to make regular reduced debt payments based on how much money you can afford to pay.

Some debtors will even agree to reduce or freeze the interest on your debt which will stop the debt from growing over time as you make smaller payments.



Debt consolidation loans

A debt consolidation loan is a loan large enough to pay off all of your existing debts in order to make your debt problem easier to manage.

Debt consolidation loans may reduce your monthly repayments as you will be paying the loan back over a longer period but if the interest rates are high on the loan you may end up paying more in the long run.



IVA

A last resort as a debt management option but preferable over bankruptcy. An IVA is a formal arrangement with your debtors to repay a portion of the debts that you owe and to write the rest of the loan off.

Though you do not risk losing an assets or property by agreeing to an IVA you will still damage your credit rating which will make it harder to borrow money in the future.



Economy & Finance

How do I go bankrupt