Bankrupt | What does bankruptcy actually mean?
Bankruptcy is a state of insolvency, which means you are no longer able to support your debts. When you are declared bankrupt, a bankruptcy order is made against you which is in effect for 12 months, at which point your debts are discharged i.e. cease to exist. Although bankruptcy is generally viewed as the last resort, it is in fact the ‘cleanest’ way of discharging debt and certainly the quickest. Other debt solutions can drag on for years and have just as bad an effect on your credit file.
Our old bugbear is people who enter into IVAs ahead of bankruptcy, when there is no clear reason why. Often people are talked into taking IVAs when they are in everyday jobs and live in rented or have a mortgaged property where there is no equity (in which case the property is not lost). The real winners are the IVA companies, who take at least the first 20 payments for themselves, in payment of their fees.
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