Is Bankruptcy My Only Option?
Bankruptcy is usually seen as a last resort, and can only occur when your unsecured debts outweigh your assets (properties, vehicles, etc.). If this is the case (for example, if you do not own a house, and are unemployed) bankruptcy could be a good option for you - but you will need expert advice before proceeding. [LINK to charities page] However, whatever your circumstance, there are other options which may be preferable to bankruptcy, particularly as they may not be so detrimental to your credit rating, and chances of future employment, property ownership etc.
Debt Management Plans
Talking to a debt advice charity with a fair and balanced approach is highly recommended before you consider bankruptcy. With some excellent free debt management plans available, there is no need to spend money on fees; equally, however, there is nothing wrong with using IVAs and re-mortgaging as ways of getting out of debt if done properly and in the right circumstances. The downside of debt management plans this is that they are not legally binding, and your creditors can opt out if they feel they are not benefitting.
- read more about debt management plans
IVAs
Individual Voluntary Agreements, or IVAs, are designed to make your debt affordable, but will often be sold as far more effective than in reality. While it's true that a significant part of your debt can be written off, the average is closer to 50% and the highest is closer to 75%, rather than 80% or 90% promised by some organisations. Whether you'd qualify for an IVA and how much you can write-off is information you will only get if you call a debt advice organisation.
- read more about Individual Voluntary Agreements
Bankruptcy
If you decide that neither of these options can work for you, Bankruptcy does not have to be seen as a crippling thing; it could be the course of action that is needed to finally free yourself from debt.
When facing bankruptcy, many people fear losing their homes. While there can be no absolute guarantees, taking your home is always seen as a last resort. If there is a way of allowing you to keep your home, it will be found. This can include you making an offer to buy the official receiver's claim on any equity in the home, or opting for a solution like an IVA where your home is protected.
Bankruptcy is definitely an area to seek firm advice. When you declare yourself bankrupt, your Trustee has the power to investigate your financial affairs without your consent. You must not sell your assets to anyone for less than fair price and you must account for what you did with the money - so you can sell your share of a house to a friend, for example, but it has to be for a fair price and the money has to go towards your debts.
- If you feel you are in a situation where you need to talk to someone about your debt problems, speak to a debt charity who will be able to offer free help, counselling and in some cases debt management plans.
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