Initially, bankruptcy was created with intentions to prevent people from being sent to prison for not paying their debts. Through this method, debtors had some control over their financial affairs, allowing them to make a fresh start and end the entire financial crisis. However, the understanding and the process of it can be a little daunting and overly complex. Therefore, we have compiled a small guide to help you understand exactly what bankruptcy is, what the criteria to get into bankruptcy is, and what it all entails. Rest assured, at Center 4 Debt Management we’ve got you covered.
It’s key to understand everything there is to know about bankruptcy before applying for it as once you have submitted your application, you cannot take it back. Bankruptcy can offer many benefits, but it can also come with the ugly so it is crucial that you fully understand it so you can make the right decision. At center4debtmanagement.com we are here to help you through the whole process of it.
What is Bankruptcy? Bankruptcy and Insolvency
When companies, individuals, and organizations cannot fulfil their financial obligations and are unable to repay debts taken from creditors and loans from different financial institutions, they declare bankruptcy.
Legal proceedings carry out bankruptcy, and the matter is taken to Court. Generally, bankruptcy is initiated by the debtor, and it will be imposed by the order of the court. When a person, a company or an organization announces bankruptcy, its investments, holdings, and assets are estimated and calculated to repay their loans and debts. This simultaneously becomes an opening for the outstanding creditors to receive some of their payments, if not the entire amounts.
Bankruptcy is also known as a state of being insolvent.
How Does Bankruptcy Work?
Lodging A Petition for Bankruptcy and Insolvency
To file for bankruptcy, you need to lodge a petition to Court. By doing this, you will be announcing that you cannot repay your debts and that you have been unsuccessful in coming to an arrangement with your various creditors. When choosing to lodge for bankruptcy, a statement of your affairs is also required when applying. At center4debtmanagement.com we can help you through the whole process, and our experts in the area will be handling it for you.
Once your application is accepted, bankruptcy will be declared official.
After submitting the application, you will not be able to change your mind, so we encourage people to ensure that they have put lots of thought before making this decision and that they seek professional financial advice like the one we can offer, so you are sure that you are making the right decision.
A Trustee Will Be Assigned to Dispense Your Bankruptcy
Managing bankruptcy can be done with a choice of registered trustees, but approval is required first. In order to obtain approval, the trustee will need to fill out a consent to act declaration sheet, which must be attached to the statement of affairs and the debtor’s petition (you).
The official trustee or the creditors will select a registered executor if the application is not submitted with a fully completed form and trustees may be changed at any time by the creditors.
Getting The Discharge Order
After receiving the discharge order from the court, debtors cannot be legally pressured to pay back the creditors or the banks, so the peace of mind that you will no longer be chased is a big benefit of declaring bankruptcy. The creditor will no longer be entitled to make you phone calls, visits, or send legal notices or letters to demand their money. When the matters go into the court’s hands, it will be their responsibility to decide what amount needs to go to each creditor and the debtor will not have any say on this.
The court will make sure that the debtor still has a house to live in, a place to do business, enough finances to carry out child support, and a reasonable amount to support their family, however, any money or capital remaining such as assets and investments will be liquified or dissolved to repay the loans from creditors and banks.
These repayment plans generally get paid in installments, and the entire process may take three to five years.
There are various types of bankruptcy and legal proceedings for becoming insolvent, but the result of all is to get away with all the vast debts and loans and have a fresh financial start.
Bankruptcy will be mentioned in collateral papers and credit reports, forbidding the debtor to borrow from banks and other financial institutions while being under bankruptcy, but once this is over, it will be possible to borrow money again from bad credit lenders.
Debts That Are Not Covered In Bankruptcy
Certain debts and borrowings are not covered under bankruptcy laws, meaning that the debtor will remain liable to pay them, even after being declared insolvent, here is an example:
If the debtor has some hire purchase agreement, this will not end up in the bankruptcy proceedings. Hire purchase is when you lend your assets to a creditor, and you take a loan to buy something else, generally a house or a car. If these hire purchase agreements do not get fulfilled, the creditor can acquire your assets and sell them to get their money back and it won’t be affected by the bankruptcy declaration.
Why Getting Professional Advice on Bankruptcy Is So Important
Bankruptcy may not be a simple process for an individual to manage on their own. That’s why at Center 4 Debt Management we are ready to help with specialised bankruptcy attorneys and professionals. When getting expert advice the bankruptcy process can be in order and proceed smoothly. And you will enjoy the peace of mind that you are complying with all laws and regulations.
Before you can file for bankruptcy, there are a few requirements you need to meet.
Is Bankruptcy For You?
You don’t have to give up because you’re in bankruptcy. On the contrary, there is a big possibility that it becoming insolvent is a beneficial thing in the long run.
Improve Your Credit Score
With bankruptcy, your debt gets erased and even though you might have heard otherwise, bankruptcy can help you improve your credit scores. Once you have paid off your debts, your credit score will start rising again and you will be able to access credit again.
An End to The Collection Nightmares
There are many factors to consider besides credit scores.
The bankruptcy process provides defaulters with the capability to prevent proceedings, collection calls, wage garnishments, and more.
However, keep in mind that money owed to tax or the child alimony office cannot get expelled in economic failure.
Gaining New Credit
You may have a hard time getting credit after filing for bankruptcy. However, several studies have shown that consumers who have filed for bankruptcy over the previous 18 months are more likely to receive new credit than those who are 120 days behind on their payments but never filed.
Cost Of Bankruptcy
A classic catch-22 situation: You’re in bad shape financially and you are getting forced to declare bankruptcy. However, filing fees and hiring the right bankruptcy lawyer can be costly. This can cost you hundreds of dollars or even thousands. That’s why we urge you to consult with our Bankruptcy experts at Center 4 Debt Management, we are ready to provide the best advice and accommodate to your budget.
Pros And Cons of Bankruptcy
|Easy process||It will be hard to obtain credit in the meanwhile|
|You can be a sole trader and run your own business||Your name will be in the public records for bankruptcy|
|In most cases, the home can still be kept||Assets can be taken|
|All harassment stops||Non – discharge|
|Most of the debt is wiped||Bad credit rating|
|Stops seizures of goods||Breaching will come with harsh penalties|
|Free of stress and financial burden||Alimony debts are not covered|
|Stops legal action by creditors||It does not cover student loans|
What Will Be Protected By Declaring Yourself Bankrupted?
Among other things, bankruptcy will protect:
- Clothes of everyday use
- Most household items and furnishings
- Tools of the trade (although these can be replaced by cheaper ones)
- Endowment policies and life insurance
- Payments made by the bankrupt for personal injury claims
- Property owned by someone who lives with you but is not bankrupt
Do You Qualify For Bankruptcy?
People may be reluctant to deal with bankruptcy criteria alone, as it can be difficult. A bankruptcy lawyer will make sure you follow all applicable bankruptcy rules and regulations and that your bankruptcy gets conducted as comprehensively as possible. Furthermore, there are certain standards you must meet before filing for bankruptcy. An approved credit counsellor must evaluate your credit history and look for evidence of bankruptcy.
You will get assistance to evaluate your financial situation, explore possible other solutions and prepare a personal financial plan with the consultant.
Voluntary Bankruptcy Petition, What Is It?
An individual who files for bankruptcy voluntarily instead of being forced to do so is called a voluntary bankrupt. The debtor can settle their obligations in an orderly and equivale fashion.
An insolvent debtor who cannot pay off their debts and opts for voluntary bankruptcy needs to file at court and get approved by it. Both individuals and businesses can use this approach.
What Is Involuntary Bankruptcy?
Creditors to whom you owe at least £5000 may apply to the court for your bankruptcy if you are incapable of contributing to your debts, cannot reach an agreement with your creditors and have not voluntarily declared to bankrupt yourself.
The consequences of not repaying a debt can be detrimental to your credit score anytime you fail to fulfil the contractual obligations. Some debt assistance choices can have more severe and long-term consequences than others. A qualified credit counsellor can help you understand the impact certain decisions will have on your overall financial well-being. You should research your options thoroughly before declaring bankruptcy as a means of debt relief.
Mortgages and Bankruptcy
Bankruptcy can make getting unsecured credit in the future difficult, and this means that you may also have a tough time getting a mortgage. Lenders may deny your mortgage application, and if they do give you a loan, the interest rate and fees may be extraordinarily high. A huge down payment may be required, or you may have to bear higher closing costs.
You may be better off reaffirming the current mortgage during the bankruptcy proceedings than selling the home and getting a new mortgage after bankruptcy. The home would remain yours as well as any monthly mortgage payment – without any other debts to worry about.
You have other options to consider if you find yourself in over debt with more than one creditor.
You might consider the following bankruptcy alternatives:
- Get a debt managing specialist that can assist you in making workable plans to repay your creditors.
- Unify your debts by taking a debt consolidation loan. Loans of this type can combine multiple expensive, high-interest debts into one low-interest loan. Consolidation helps to lessen your debt payments, making them easier to manage.
- See if your creditors are interested in working with you on a more manageable payment plan. Your creditors don’t want you to default on your debts either, so they may be willing to discuss coming up with a repayment arrangement that is more affordable. You might want to explore some Debt Management Plans alternatives.
Do I Become Bankrupt Myself Or By Others?
There are two ways into bankruptcy; being voluntarily bankrupt means that you filed for it yourself. However, you might be forced into bankruptcy by a creditor to whom you owe money and this would be involuntarily bankruptcy.
How Long Does Bankruptcy Last?
The main time frame is 3 to 7 years. This can be extended by your trustee if needed.
Is There A Way To Verify That A Person Is Bankrupt?
Some services allow you to check personal insolvency data. However, most require a fee to do this.
Do I Need To Go To Court When Filing For Bankruptcy?
Not always. Only if your case is somewhat complex and you have arguments against becoming bankrupt then a court appearance may be necessary. Once you have been declared bankrupt, you will need to face court if you don’t follow your obligations.
Am I Able To Keep My Tax Returns When Declared Bankrupt?
Any tax return that has been received before the date you were rendered bankrupt is classed as an asset. This means that you cannot keep the return and that it will go to the trustee.
Am I still Required To Put In My Tax return?
Yes, even if you are bankrupt, you still need to lodge.
What If I Receive Money From a Third Part?
If you get any quantity of money such as inheritance, valuable assets, a lottery win, or even becoming the beneficiary of someone’s estate these will need to be used to end the bankruptcy.
Can I Lose My Job?
In some cases, bankruptcy can affect certain employments. You can’t hold certain permits and certificates and you cannot obtain any security clearances. Check the conditions under your employment and what happens if you declare bankruptcy.
Do I Need To Be Honest When Filing For Bankruptcy?
Yes, you do. Anything you lie about will be found. Any hidden assets will be found. A thorough investigation occurs, so it is important you are honest and upfront.