Bankruptcy is a scary word with a major stigma attached to it, but the fact of the matter is, it can help some people in certain circumstances. If your debts are of an insurmountable level and you genuinely cannot see another way out, then you may have to go down this road.
Bankruptcy should only be considered if all other avenues of debt management have been exhausted. If you have tried consolidation loans, refinancing your repayments and even IVA's, to no avail, then this is the only other option.
As a form of
debt management, bankruptcy has its advantages, although these are very few. Once you have filed for bankruptcy, you can have peace of mind that your debts will be settled and after a year, usually you will have a completely fresh start. It will also keep your creditors happy so you don't have to worry about any more payment demands.
Unfortunately, out of all the
debt management options, bankruptcy also carries some of the biggest disadvantages. The one which affects people the most is the loss of assets. The majority of your assets – including your home in most cases - are seized to help in the repayment of your debt, and you are only left with the essentials and low-worth items such as basic furniture, clothing, bedding and things you may need for your employment like tools, books etc.
You may also be subject to an Income Payments Order, which means that a portion of your income goes towards your creditors. This usually happens if it is suspected you may have a large portion of surplus income after filing the bankruptcy.
Unlike other forms of
debt management, bankruptcy cannot be kept private. Details of any people declared bankrupt is available on the internet and your case may also appear in your local paper. You are also legally obligated to reveal your bankruptcy if you are working or when applying for jobs, which could go against you.
If it's at all possible to avoid bankruptcy, do so. It should never be seen as an easy way out of your debts.
