IMPORTANT FACTS – What to expect if you go bankrupt
- Many people have some form of debt, be it money owed on a credit card, a bank loan or overdraft, or a mortgage. But if you’re having trouble paying your bills or loan repayments, you should get help as soon as possible.
- Bankruptcy is a way of dealing with debts that you cannot pay. While you are bankrupt, any assets that you have might be used to pay off your debts. After a period of time (usually one year), most of your outstanding debts are written off and you can make a fresh start.
- You can apply for bankruptcy by filling out a Debtor’s Bankruptcy Petition where you list the reasons why you are applying for bankruptcy, and a Statement of Affairs where you list all of your assets and debts. There are fees for applying for bankruptcy that vary from £525- £700.
- Once you have been made bankrupt, an Official Receiver or an Insolvency Practitioner will be appointed as trustee and will assess your income, outgoings and assets to make decisions on how these can be used to meet your debts.
Your creditors have to make a formal claim to the trustee for the money they are owed. You can’t make direct payments to them and they can’t ask you for payments.
- Bankruptcy is an extreme option for debts that seriously can’t be paid. In 2014, every 5min 12 secs someone was declared insolvent or bankrupt. (source)
VIDEO– Bankruptcy happens when there is uncontrolled debt. This video gets you thinking about types of debt and perception.
IMPORTANT FACTS-Priority and Non-priority Debts
| What are they? | Examples | |
| Priority debts | -Debts that should be paid first because there are serious risks if they are not paid.- Not paying could lead to losing home, bankruptcy, having heating or lighting cut off, court summons-Not necessarily the largest or highest interest rate debts | -Mortgage, rent and any loans secured against your home-Income tax, National Insurance and VAT – Council Tax- Gas and electricity bills- Child maintenance- TV licence- Hire purchase agreements, if what you’re buying with them is essential- Court fines |
| Non-priority debts | – Debts that can be paid after priority debts.- Not paying will not lead to losing home, heating or court summons | – Credit card, store card debts or payday loans- Catalogue, home credit or in-store credit debts- Overdrafts- Bank or building society loans- Personal loans-Money borrowed from friends or family |
Bailiffs
A bailiff (‘enforcement agent’) may visit your home if you don’t pay your debts and you ignore letters saying that bailiffs will be used. Bailiffs must usually give you at least 7 days’ notice of their first visit.
If you think a bailiff might visit you to collect debts, you can stop this by paying the money you owe. Get advice about how to pay your debt from whoever you owe money to as soon as possible.
Dealing with bailiffs
You usually don’t have to open your door to a bailiff or let them in.
Bailiffs can’t enter your home:
· by force, for example by pushing past you
· if only children under 16 or vulnerable people (with disabilities, for example) are present
· between 9pm and 6am
· through anything except the door
Bailiffs are allowed to force their way into your home to collect unpaid criminal fines, Income Tax or Stamp Duty but only as a last resort.
If you don’t let a bailiff in or agree to pay them:
· they could take things from outside your home, for example your car
· you could end up owing even more money
If you do let a bailiff in but don’t pay them they may take some of your belongings. They could sell the items to pay debts and cover their fees. *Always check the bailiff’s identity before letting them in or paying them and make sure you get a receipt
What bailiffs can and can’t take
If you let a bailiff into your home, they may take some of your belongings to sell.
Bailiffs can take luxury items, for example a TV or games console.
They can’t take:
· things you need, such as your clothes, cooker or fridge
· work tools and equipment which together are worth less than £1,350
· someone else’s belongings, such as your partner’s computer
You’ll have to prove that someone else’s goods don’t belong to you.
VIDEO– Money Advice Service video on dealing with debt
IMPORTANT FACTS- Dealing with debt- 10-step plan
- Don’t take on any new debts – particularly not from a loan shark (unauthorised money lender)
- Work out how you got into debt – is it a one-off item, regular spending or not enough money to buy basics?
- Contact the people you owe money to and have a plan about how you are going to pay it back. Arrange regular payments but make sure you really can afford them. Try to spread out the payments over a long time – say 6 months or a year.
- Some debts are more important than others, because the consequences of not paying them are more serious. Treat any of these debts as a priority: hire purchase, magistrate’s court fines, rent arrears, maintenance payments, council tax, income tax, national insurance or VAT arrears, gas or electricity
- Make a proper budget so that you avoid further debt and will show people that you are taking the situation seriously.
- Can you bring some more money in with a part-time job? Are you claiming all the benefits that you are entitled to?
- If you’ve got a credit card, try to find a cheaper way of paying off the balance, then close your card and return it to the company that gave it to you.
- Can you get a cashless grant (food, clothing or travel vouchers) from your Local Authority?
- Make a list of what you need to do – and do it.
- Seek professional advice from free, confidential services
By the looks of it, the U.K. needs some debt management advice…
http://www.nationaldebtclock.co.uk/