Is Bankruptcy the easy way out?
On many occasions I have encountered people who say that bankruptcy is the “easy way out” of debt.
Some people think that bankruptcy wipes off 100% of debt, and you can be completely debt free within 12 months. Unfortunately this isn’t always the case and, therefore, bankruptcy should never be viewed as the easy way out.
Bankruptcy is a form of insolvency and is one of the many options available to people who are in financial difficulty. Contrary to the belief of some bankruptcy is a complex, and sometimes difficult, solution to your financial problems.
A bankruptcy petition currently costs £525 with a further £175 in costs towards the court fee. Once a bankruptcy petition is filed an Official Receiver is assigned who will go through a person’s finances, assets and debts. If there are valuable assets such as a house, motorhome, jewellery or a car then they will look at selling them in order to pass the funds to the creditors.
As well as assessing assets, the Official Receiver will look at income and expenditure; if a person has a surplus left once they have accounted for all of their monthly outgoings then they could be requested to pay what is called an Income Payments Order (IPO).
An IPO is where a person pays any surplus income towards their bankruptcy for a set period of time, usually three years.
In addition, Bankruptcy will normally remain on a person’s credit file for six years from the date they were made bankrupt.
If you are looking into bankruptcy you may be able to get help with the fees, click here to for more information.
Written by Gemma on November 29th, 2011
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