Often referred to as the 'Ultimate Option', bankruptcy is a formal debt solution available to anyone living in England, Wales and Northern Ireland. Bankruptcy is also available to people living in Scotland, where it is also known as Sequestration.
To be eligible for bankruptcy you must have accumulative unsecured debts of more than £750.
For most people suffering with severe debt problems, bankruptcy will be the quickest and cheapest way of becoming debt free.
However, bankruptcy does have its downsides.
Bankruptcy is a particularly strong solution and will deal with all levels of unsecured debt, irrespective of the amount owed and to whom. But this is a double edged sword, for bankruptcy's power is indiscriminate and by using bankruptcy to become debt free you forfeit the right to keep control your financial affairs.
Instead, you relinquish control of your financial circumstances to the 'Official Receiver'.
As a result, valuable assets and property with equity will be vulnerable to the bankruptcy process.
Some professions are prohibited from using bankruptcy as a solution without the risk of facing sanctions from the respective regulatory or professional body.
This also extends to Directors of Limited Companies who must also resign if they become bankrupt.
It is, therefore, always advisable to have a chat with a independent debt adviser before declaring yourself bankrupt to ensure you are fully aware of the potential consequences.
For more information on the bankruptcy solution read -
Alternative To Bankruptcy
There is usually an alternative option available for those people wanting to avoid bankruptcy and, even though more money will be repaid over a longer period, the alternative solution of an IVA does allow you to retain control over your financial affairs.