Did you know that 329 people will be declared bankrupt or insolvent today? And that this number will rise to approximately 429 people per day by the end of 2009?
It is not surprising when you consider that approximately 8 million people in the UK are suffering with excessive debt due to a number of reasons. With 2,915 people becoming redundant every day during the 3 months to end January 2009, it is little wonder that this level of bankruptcies is arising.
So what are the main benefits and drawbacks of going bankrupt? And are there any real alternatives for many people?
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What are the main advantages for you of going bankrupt?
* For most people bankruptcy provides immediate peace of mind as the problem is effectively taken out of your hands
* It is possible that you will be automatically discharged after one year (or less in some cases), though you will generally continue to have an attachment to earnings for a further 2 years. * No more letter, harassment or phone calls from your creditors.
What are the main negative implications for you of going bankrupt?
* You will lose control of all of your main assets, such as your house, car, jewellery, etc.
* You will not be able to obtain a loan or credit for over £250 (without the permission of the lender).
* You can no longer act as a company director.
* You cannot take any part in the formation, promotion or management of a limited company without first obtaining the permission of the court.
* You can only trade in a business under another name if you inform all persons concerned of your bankruptcy.
* You may no longer practice as a Lawyer / Charted Accountant.
* Your credit will be affected for many years after you have been discharged.
* You are not permitted to act as a Justice of the peace.
* You are not permitted to become a member of parliament.
* You are not permitted to become a member of the local authority.
* You could be publicly examined in court (though this is not usual).
* If your current home rental contract prohibits bankrupt individuals from renting the house, you could be evicted from your home.
* You will find it difficult to rent a house through any major letting agent.
So there are a number of things to consider when you are thinking that bankruptcy is the best option for you and there are a number of alternatives for many people that would normally have gone bankrupt.
* Debt management
* Independent Voluntary Arrangement
* Debt consolidation
* Legal debt write-off
The biggest issue really for most people is that they do not know which is the best way to go for them and they think that bankruptcy is a quick fix. In some cases bankruptcy is the only option, but for many a multi pronged approach to the problem is far better.
There are a number of option available under the Consumer Credit Act 2006 to enable you to pay as little as £20 per month to a creditor and they must accept if you can show them that you are suffering anxiety and stress from the debts you have. This is all thanks to the unfair relationships section which gives a great deal of power to you.
It could be that some of your creditors do not have the legal right to the money they are demanding. This is where legal debt write-off is useful it can be used to get you debts completely written off.
An Independent Voluntary Arrangement ( IVA) is a very popular method of cutting your debts and getting out of debt within 5 years, but it is not available to everyone and the failure rate can be high with people who do not have a guaranteed stable monthly income throughout the 5 year period.
Debt consolidation does not have a very good success rate as many individuals are then free to take out more debt and actually get targeted by the banks as a prospective good customer.
It is never easy to find a one-size-fits-all approach to personal debt clearance and the best approach is to look for a middle path. It maybe that you can get some of your debts written-off, whilst you may consolidate other and free up cash to pay-off secured loans more quickly.
It is important to realize though that some of your debts need not be paid at all if the bank did not perform their duties to you properly and left you in a disadvantaged position. The correct legal advice on that subject is vital!
Whatever your circumstances, finding out your options and getting advice about all these possibilities is a must before you decide to go bankrupt.
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