Benefits and Drawbacks of Bankruptcy

Outlined below are some of the benefits and drawbacks of bankruptcy. It should be noted that bankruptcy is not to be entered into without first having sought professional advice.

There is more to bankruptcy than as a way of finally putting an end to harassing debt collectors and creditors. One big side effect of bankruptcy being that your life is likely to be subjected to intense scrutiny.

These are some of the benefits of bankruptcy:

Relieves the stress caused by dealing with numerous creditors.

Once a bankruptcy order is made, a third party takes over the administration, decision making and payment process of the debts.

Creditors forced to recognise that they must accept less money than is owed.

Debtors typically pay less with a bankruptcy order than with an Individual Voluntary Arrangement.

Once discharged, most debts are written off and creditors cannot pursue them.

Here are some of the drawbacks associated with bankruptcy:

The debtor will lose any realisable assets of value.

If the debtor owns equity in a home, this will almost certainly be sold.

If a business is owned, this could be sold and any employees dismissed.

Bank current accounts can be difficult to obtain.

It is a costly process. All fees for the insolvency service, courts and any trustee are taken out of the debtor's assets.

If trying to obtain credit of more than £250 the debtor must disclose his status as an undischarged bankrupt. The debtor must allow all his financial affairs to be scrutinised.

Names of those made bankrupt are published in the London Gazette and the local press and can be viewed online at the Insolvency Service website, making them accessible to anyone in the world.

Cannot hold certain public offices, such as MP, councillor or magistrate, or practice certain professions, such as solicitor and accountant.

A bankrupt may not hold office as a trustee of a charity or a pension fund.

A bankrupt is not allowed to be a company director or trade under any other name than the one used at the time of bankruptcy.

The trustee must be informed of any changes in circumstances during the bankruptcy.

Certain debts cannot be written off: fines, maintenance/child support payments, other family court orders, debts to secured creditors, debts from personal injury claims, debts incurred through fraud, debt arising from certain other orders of the criminal court.

Bankruptcy does not affect the rights of secured creditors. Where there are joint debts, creditors can still pursue the non-bankrupt debtor.

Bankrupts found to be blameworthy, culpable or dishonest can be made subject to a Bankruptcy Restrictions Order which can impose the same bankruptcy restrictions, plus some additional ones, for anywhere from 2 to 15 years.

You may freely reprint this article provided the author's biography remains intact:

About The Author

John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the http://www.directonlineloans.co.uk website.

More Resources

Unable to open RSS Feed $XMLfilename with error HTTP ERROR: 404, exiting

More Debt Relief Information:

Related Articles


Should You Invest In Savings Or Payoff Your Debts?
I have faced this financial question 8 years ago and recently I have friends asked me this same question. I think I should write it up so that it may help some of you that having the same situation.
Free Quick and Easy Money Saving Tips - Part 2
Although many consumers would argue differently saving money doesn't have to be difficult. In fact by making just a few changes in your normal lifestyle you can find ways to free up extra cash that can be put to better use in a savings account or an investment account.
Credit Counseling - Signs That You May Need Help
Credit counseling is a viable option for those who are feeling the stress of being overwhelmed by debt. Credit counseling primarily offers assistance with working out a credit and debt repayment plan for an individual to gain control of their finances by creating a structured budget for an individual to follow.
Debt Settlement -- Why the Critics Are Wrong
After October 17, 2005, a lot of people are going to become interested in debt settlement as an alternative to bankruptcy. That's the date the new bankruptcy law goes into effect, and it means a rude awakening for many consumers seeking a fresh start in bankruptcy court.
Selecting A Credit Counselor; Asking The Right Questions.
When you find yourself thinking about using a credit counseling service, you need to be verycareful. You need someone who will help you, not just some pushy sales associate who wantsonly to sign you up for their service.
How to Reduce Your Debt in 5 Easy Steps
If you have incurred substantial personal debt, consider these options: budgeting, debt consolidation, credit counselling from a reputable organization and working with your creditors. You will need to choose a debt reduction method that will work best for you? The method you use will depend on your level of debt, how much spare money you have, your level of discipline, and how quickly you want to get out of debt.
Secrets to Why Debt Reduction is So Vital for Your Financial Health
Living with debt is never a good idea if you want to make long-term financial plans. Every cent you use to service debt is money that could have been invested in your future.
Life After Debt - Strategies for Dealing with Problem Debt
Honorably and ethically rid yourself of burdensome debts using the little known Negotiation Strategy, without having to experience the loss of control and privacy associated with filing for bankruptcy, consolidation, or credit counseling.The inability to reduce debt and saving money are the two biggest obstacles preventing Americans from living financially sound lives.
Debt Reduction, a Necessary Endeavour
Massive debt is something many Americans face. Debt reduction is now becoming more and more of a necessity.
4 Simple Ways to Solve Your Debt Burden
Getting BehindGetting behind on your debts owed can be a very frustrating and trying time for you and your family. Depending on how far behind you are, there are other repercussions, such as your credit rating, that will affect you further down the road.
What You Should Know About Bankruptcy
Filing bankruptcy is not only a last resort legal action; it is also a very complicated legal action that definitely needs the expertise of a lawyer. When thinking about bankruptcy, you first need to decide if bankruptcy is right for you.
Are You Beating Up On Yourself About Debt?
When you hear the word "debt", whats the first thought or feeling that comes to you? For most people debt is "bad" or it becomes the "enemy" and is something that should be avoided like the plague.Having debt does not make you a bad person.
Home Equity - Foreclosure Often Not Necessary in Current Market
While driving around your community, you may have seen signs posted on telephone poles that offer "foreclosure help." These seemingly generous offers to help financially troubled homeowners who are in danger of losing their homes to foreclosure are actually scams.
New Bankruptcy Law Will Not Protect You from Identity Theft
Recently passed by Congress with overwhelming support, the oddly-named Bankruptcy Abuse Prevention and Consumer Protection Act was designed to eliminate "bankruptcy of convenience." The perceived problem is that many compulsive gamblers, shoppers and drug users often run up huge debts on easily available credit cards with no intention of paying their bills.
Ten Ways to Get Out of Debt
1) Use your AssetsIf you have assets with some significant equity, such as a home or a car you may be able to use these to get control of your debt. For example, you could get a loan on your home sufficient to pay off your debts.
The Effects of Consumer Debt
Consumer BorrowingConsumer borrowing in the UK has now crashed through the £1 trillion barrier. 80% of this is due to credit card borrowing, loans and mortgages.
The Road to Debt Relief
Living with debt is not something someone hopes for, but it happens and it usually becomes far more severe than it should before something is done to eliminate it. Once many individuals realize they have a problem with debt, they are too embarrassed to ask for help so they let themselves dive further into debt.
Benefits and Drawbacks of Bankruptcy
Outlined below are some of the benefits and drawbacks of bankruptcy. It should be noted that bankruptcy is not to be entered into without first having sought professional advice.
New Bankruptcy Law Makes it Harder to Stop Foreclosure
On October 17, 2005 President Bush's sweeping bankruptcy reform law goes into effect forever changing the rules of debt collection in this natiion. Consumer advocates and the public appear to be completely unaware of the total and complete victory of the creditors under the new legislation.
The Human Side - Debt Stress
In all the technical discussion you hear about credit card debt, the best ways to manage it and pay it off and all the rest, one thing goes largely ignored. Credit card debt is extremely stressful, and can have a very negative effect on your life, if you let it.