Most people have heard of bankruptcy but actually know very little about what it actually is. Bankruptcy is an option for people who are in serious debt and not in a position to repay it. However, bankruptcy is by no means an ‘easy way out’ of debt, which many people assume it is.
In a nutshell, bankruptcy is a process that can be started at the request of the creditors and/or the debtor. Once a bankruptcy order is passed, the assets of the debtor become the responsibility of an Official Receiver or a licensed Insolvency Practitioner. The person in control is responsible for uncovering all assets and distributing them accordingly amongst the creditors. All debts are written off and creditors are prohibited from contacting you to recover the debt.
The obvious benefit of this option of dealing with debt is that all debts are written off. However, the cons are numerous and only highlight why this should be chosen only as a last resort.
Once the order is passed, you lose control of all assets, meaning that personal belongings are at risk, including your family home, car etc. The fact that you have been declared bankrupt will be made public in your local newspaper and you will have this noted on your credit rating for several years, making it hard to obtain credit in the future.
Some occupations carry restrictions with regards to being declared bankrupt, meaning that you may find it hard to find employment in certain areas or the chance of promotion could be hindered. Until you have been discharged from bankruptcy you cannot act as the director of a company and you will not be able to take part in the promotion, formation or management of a limited company without prior consent of the courts.
