Many of those considering bankruptcy often abandon the idea due to fear of the unknown. With doubt surrounding all manner of issues, people opt for ‘safer’ options such as Debt Management Programmes (DMPs) or Individual Voluntary Arrangements (IVAs).
Ironically, the very alternatives designed to ‘soften the blow’ often result in protracted payment plans that achieve little or nothing. Under a DMP, there is little prospect of ever repaying the capital while most IVAs are abandoned after 2 – 3 years due to the payments being unaffordable and constantly reviewed.
Indeed, 80% of our client base is made up of former DMP and IVA clients. With a maximum bankruptcy period of just 12 months and a guarantee that the debt is liquidated once and for all, smarter members of the public have seen the light. Who needs a five year debt plan when everything can be done and dusted in 12 months?
Of course, there are the usual doubts: ‘What will I lose?’, ‘Who do I see?’ and ‘Will I be embarrassed in open court?’ To put your mind at rest, here are the top eight myths and the answer to the questions:
I will have to explain myself before a Judge. This is no longer an issue as cases are now processed online and there is only one phone call involved, but no face to face interaction. Other communication will be by letter and email, but nobody comes to your house at any point during the process. You can literally enter into bankruptcy from the comfort of your armchair.
Bankruptcy will ruin my credit rating forever. Wrong. In many cases, people have good credit ratings as soon as 18 months after discharge. If active measures are taken to improve credit ratings, it is now possible to get a mortgage three years after discharge, provided there has been no trouble in between.
I won’t be able to have a bank account . It is now extremely rare for banks to close accounts unless there was debt with the bank in question. However, if you are having problems try the Barclays’ ‘Cash Account’ (which has a chip and pin card) or Cooperative Bank’s ‘Cashminder’ account. Both will welcome you with open arms.
I will lose my mortgaged property. Not necessarily. If the house is in negative equity, any decision will be deferred for 27 months pending another assessment of the equity position. Even if it was found there was some equity after two years, a forced sale is unlikely. More likely is that a charge would be placed against the property, to be redeemed when the house was sold.
Bailiffs will take everything away. Wrong. Bailiffs have got nothing to do with the bankruptcy process. Bailiffs usually only appear for one of two reasons a) non-payment of the monthly terms of a County Court Judgement or b) non-payment of Council tax following the issuing of a Liability Order. If you have neither of these you will not see a bailiff.
I will lose my job if I go bankrupt. Most unlikely. There are few professions that have restrictions and these are mostly in financial services and Solicitors, but for most everyday jobs this simply isn’t the case. We have taken countless NHS staff, teachers, Council and office workers through the procedure with no comeback.
I will have to make monthly payments for the next three years. Although it’s true that the Official Receiver will assess whether you have any surplus income with a view to placing you in a payment agreement, this is avoidable. We use the same income calculators as the OR and know the limits of everything that can be claimed in overcoming this problem.
My Landlord will ask me to leave. If you feel that your tenancy may be under threat, you can now overcome this issue by providing a copy of your tenancy agreement to the Official Receiver upfront. Provided your landlord isn’t one of the creditors in the bankruptcy, no letter will be sent.
And there you have it, most of the issues have been debunked. There might be other factors that we haven’t covered here, but give us a call on 01425 600129 and we will gladly talk you through it.