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Anyone who is struggling to pay their debts have the potential to be declared bankrupt, but it should only be considered once alternative debt solutions have first been explored.

If you are worried about missed payments or financial difficulties and considering bankruptcy, contact PayPlan today for quick, free and professional advice to help you find a better solution.

What is bankruptcy?

Bankruptcy can occur when an individual’s debts are greater than their assets. Declaring bankruptcy means an individual is financially insolvent and can be relieved of outstanding debts.

In the UK the term applies to individuals; administration or liquidation is the term applied to companies or organisations (read more about business insolvency).

Bankruptcy will deal with all of your unsecured debts, including:

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What are the alternatives to bankruptcy?

If you think you are likely to go bankrupt and are unable to repay your debts, you could still be in a position where you can choose from these better alternatives to avoid the consequences of bankruptcy:

In cases where it is decided by an Official Receiver that a bankruptcy has been brought about through the person’s own irresponsible or imprudent conduct, the Official Receiver is able to apply for a Bankruptcy Restriction Order, which can be applicable for between 2 and 15 years, in addition to the normal length of discharge.

Examples where this may be deemed the case include:

Remember, bankruptcy is not the easy way out, and there are alternative solutions available.

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Key things you should know about bankruptcy?

Before considering bankruptcy as a solution to unpaid debts or unmanageable debts, there are some key factors you should be aware of:

*Prior to 01 October 2015, creditors could petition for bankruptcy if a creditor owed them £750 or more.

What is the process of being made bankrupt?

Before deciding to go bankrupt you should explore all of your alternatives, including an IVA and a Debt Management Plan. If you make the decision to go bankrupt you should expect to follow the subsequent process:

Ironically, if you wish to petition for your own bankruptcy you have to pay the appropriate fees involved. In England and Wales, there is a standard fee of £705 for bankruptcy – this is made up of a court fee of £180 and an Official Receiver’s fee of £525. In Northern Ireland, there is a standard fee of £647 – made up of a court fee of £115, an Official Receiver’s fee of £525 and a solicitor’s fee of £7. If you’re on a low income or receive benefits, you may be exempt from paying the court fee.

Be aware of companies who can offer to arrange bankruptcy as there may be fees involved, which would increase the cost.

Whilst many believe that becoming bankrupt is a free process, sadly it does come with costs. Should you not be able to afford to declare yourself bankrupt, it’s important that you talk to an adviser to discuss your options, and whether there is any available funding to you from local authorities or trust funds.

It is important to contact a PayPlan adviser to discuss all of your options before beginning the process of bankruptcy, as there are often more favourable solutions you may be eligible for.

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Is bankruptcy the easy way out?

Many people falsely assume bankruptcy is the easy way out of their debt problems and that you can be completely debt-free within 12 months.

Unfortunately, this is not always the case and you need to be aware of the implications of going bankrupt. This not includes a monetary cost, but it has consequences regarding future employment and financial matters.

How will bankruptcy affect me?

If you are declared bankrupt, you are no longer liable for any outstanding debts documented in the bankruptcy proceedings. This can give you peace of mind and alleviate stress. Your assets will be shared out between creditors and you can make a ‘fresh start’.

However, this doesn’t come without its repercussions. Read on for the negative consequences of bankruptcy.

What are the disadvantages of bankruptcy?

If you have debt problems and are looking for an alternative to bankruptcy, contact PayPlan today for quick, free and professional advice to help you find a better solution.

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