The Consequences of Bankruptcy

Up until a few generations ago failing to pay your debts could mean going to prison. The penalties these days are far less severe, but there definitely are consequences to going bankrupt. This is why people are always advised to try other options before choosing this route. Going bankrupt is not the end of the world, by any stretch of the imagination, but it is something that is always worth avoiding if at all possible.

The Consequences of Bankruptcy

Here are just a few of the potential consequences of going bankrupt:

• By going bankrupt you will lose control of your current assets.
• There will be a record of the bankruptcy following you around for at least 6 years.
• Even when you make it past six years from the date of the bankruptcy it will still affect your ability to borrow money. If you ever apply for a mortgage one of the questions you will be asked will be if you have ever been made bankrupt.
• An income payment order will mean that you will still have to contribute money to your debts for three years after the bankruptcy.
• There are some professions that will not be able to offer employment to anyone who has been bankrupt.
• If you want to open a business in the future it may be difficult depending on the conditions of your bankruptcy.
• You will have to get the permission of the court if you ever want to be the director of a company.
• If you commit any bankruptcy offences it could mean that you will still end up in jail. These offences can occur before, during, or after bankruptcy.
• It can be difficult for people who have been made bankrupt to open up a bank account.

Alternatives to Bankruptcy

It is always going to be better if you can avoid going bankrupt. Here are just a few of the possible options at your disposal.

• A debt consolidation loan is where you borrow money to clear all your existing debts. This means that you then only have one debt to pay each month. This should also mean that you will be paying back a lot less interest than you would be otherwise; you also won’t have to hide from a pile of red letters every month. You can usually pick up a consolidation loan on favourable terms.
• A debt management plan is an informal proposal that is made to your creditors as a solution to your debt problems.
• An individual voluntary arrangement (IVA) is another good option. This is an agreement you make with your creditor for how you can attempt to pay back the money you owe. It will usually mean paying back a lot less than your debts. A creditor will agree to an IVA because it means that they might get back more money than they would through bankruptcy. It is a legally binding agreement, and needs to be set up on your behalf.