Bankruptcy Questions Answered

Neil Robertson asked:


If you are considering going bankrupt, then you are obviously in a very serious debt situation. Bankruptcy may not be the best solution for you, so it is very important to consider the alternatives and get qualified debt advice.
What are the Consequences of Going Bankrupt

In the UK, the consequences for bankrupts are quite severe. You will have your bank accounts frozen, you will have to sell any major assets that you own (house, car etc.), and you may have to pay some money each month out of your income to the insolvency service (this is quite rare). Certain professions do not allow you to be a bankrupt, e.g. accountancy or police.

You will not be able to obtain credit whilst you are bankrupt and you will find it extremely difficult to obtain once you have been discharged from your bankruptcy.

There is a risk of a criminal conviction if the investigation into your finances finds that you were reckless in the way that you got into debt (e.g excessive gambling etc.) and had no intention of paying it back. These types of convictions are quite rare and will only be applied in the most serious of circumstances.

What are the Benefits of Bankruptcy

Bankruptcy is the quickest route to becoming debt free. Once you have presented your petition and been declared bankrupt you will immediately be free of all your unsecured debts. This compares favorably with the timescale for an individual voluntary arrangement that can take 5 years or more to clear your debts.

Alternatives to Bankruptcy

If your situation is serious enough to consider bankruptcy then the only realistic alternative that will resolve your debt problem in a reasonable time is the Individual Voluntary Arrangement (IVA). This is suitable for people that have a profession that will not allow bankruptcy and also makes it more likely that you will be able to keep your home. As previously noted it will take longer to resolve your debt problems (5 years is the standard period but this can be shortened by making a lump-sum payment from a remortgage). There will be no investigation into your finances other than the proposal that the Insolvency Practitioner puts forward to your creditors.

Making the Decision Between Bankruptcy and an IVA

You should always seek qualified advice when deciding between bankruptcy and an IVA. The following is offered as guidance only:

You should try to arrange an IVA if: You have significant assets that you want to protect. You are in a profession that doesn’t allow you to be bankrupt. You are worried that your conduct might leave you open to criminal conviction.

You should consider bankruptcy if: You don’t own you own home. Your job is not money related and there are no known restrictions on you becoming bankrupt.



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Cornie Herring asked:


People loves credit card because it provides convenient on spending that meets today’s lifestyle, but they also **** it because it may cause them to trap in overwhelming debt, some people even need to go for bankruptcy filing to relief themselves from credit card debt. If you are at this worse financial situation due to large credit card balances that beyond your financial affordability to clear it, what are the options available for you to resolve your debt problem?
Many heavy credit card debtors tend to think of going for a bankruptcy filing so that they can relief themselves from hassling phone calls and surprising visits from their creditors to ask for their debt payment. But, they did not or might not aware of the consequences of filing a bankruptcy that will follow them for years (7 to 10 years) before they can freely reuse their credit again. Hence, bankruptcy filing should always be your last option after you have explored all alternatives for better options than bankruptcy which can potentially resolve your debt issue.

Credit card debt consolidation can be your alternative to bankruptcy. You should always explore this option for debt relief before you go for extreme solution such as bankruptcy filing which may badly hurt your future credit worthiness. You either can choose to consolidate debt with an unsecured or secured loan. But, if you have reached the status of receiving harassing phone call and getting visits from debt collectors, then you may already hurt your credit ratings due to the late payment or default payment. Then, it might be hard for you to get an unsecured loan to consolidate your credit card debt; however, it still worth to try to search for one, but be prepared that you won’t be able to get the best interest rate. If you manage to get an unsecured loan with interest rate that is good enough to consolidate the debt and bring it to current status, then you can avoid the need to filing for a bankruptcy.

If you own a home, you will be at a better situation to resolve the overwhelming credit card debts by consolidating them into a secured loan. You can apply for a home equity loan or refinance a mortgage to cash out money to pay off your debt. By pledging an asset for a loan, you should be able to find a good loan with low interest rate which you can use it to consolidate your debt. Remember, using your home to secure a loan also means that you are risking your home because you may lose it if you default the loan, so you should always make your loan repayment on time and don’t build more new debt before you clear the loan.

Summary

Bankruptcy filing is not the only solution for heavy debtors to get a relief from their overwhelming debt problem. You should always explore other alternatives for better debt relief options such as debt consolidation, which can potentially resolve your debt problem and able to minimize impacts on your future credit worthiness.



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Henry Davidson asked:


If you are greatly pressured by an overwhelming debt, which beyond your financial capability to resolve it, does it mean bankruptcy filing is the only option for you to get a debt relief?

Most often, debt counselors will not advise debtors to file a bankruptcy unless there is no way out of debt. The survey results found that 90% of debtors who go for this option do have other options, they just either don’t know or they don’t really explore for available debt relief solutions before deciding to go for a bankruptcy filing. If you are one more step toward a bankruptcy filing, hold-on for a moment because you might be able to get rid of debt with a better option. Don’t ever choose to go for bankruptcy filing before you explore the available options.

If you are about to file a bankruptcy, it is no harm to explore more options since there is no other option as bad as this debt solution. The very first step you might need to take is to approach a credit counseling service. Most of credit counseling services are free of charge in term of providing counseling services. When you approach a credit counseling agency, a counselor will be assigned to understand your financial situation and your debt problem before they propose a solution that best fit your condition. Most probably you will be proposed with a debt management plan that may involve a monthly fee if your financial condition can fit into a debt management program. This means you have a solution that is better than filing a bankruptcy.
Other than credit counseling service, you may also approach a debt negotiation company to help you negotiate for a settlement. But, this option may require a lump-sum of money to be paid for the agreed settlement amount. So, you are able to prepare the money for settlement. Be aware that the fee you need to pay for the service of negotiation might be rather high, so make sure you get the negotiator to reduce your debt as low as possible. Some companies may help you to cut off 40% to 60% of your debt if you are able to pay a lump-sum of money to your creditors and get your debt erased. Therefore, debt negotiation for settlement should be a better option if you can afford to pay the negotiation fee and the settlement amount.

You will be a better situation to get your debt problem resolved if you have asset that can be pledged for a secure loan. Although paying off your debt with a loan does not mean you are free from debt, you will be able to relax the overwhelming and high pressure condition to a more comfortable level. For example, if you own a house, then you can apply for a consolidation loan or refinancing it to cash out the money and pay off your debt. Be aware that by securing a loan with an asset, you are putting your asset at risk because it will be foreclosed if you default the loan payments. Therefore, you need to make sure you pay the loan on-time during the repayment period. If you have asset that can be used to secure a loan, you can always get rid of debt without bankruptcy, what you need to do is to make sure you pay the loan on-tine so that you won’t get yourself into bad debt again.

Summary

There are always other options other than bankruptcy filing to resolve a debt problem. You should always explore the available options to get rid of debt and avoid filing a bankruptcy with the best effort.



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