What bankruptcy means

• You may have to give up most of your assets, salary and any investment in your house.
• You may be forced to close your business if you own one.
• Any property, even jointly owned property, or shares may have to be sold to pay back money you owe your creditors.
• If you receive any money during the process you will probably have to give this up. If you win the lottery, for example, or receive an inheritance, you will not have control of this money.
• Credit blacklisting may last for as long as 15 years.

Alternatives to bankruptcy

• Try to enter into an informal arrangement with your creditors to pay back the debt. Without a legal undertaking, however, there is a risk that your creditor could ignore this agreement at a later stage.
• If your debts are under £5000, and if you have at least two debts, one of which is a high court or a country court judgement, you can apply for an administration order. This helps to pay back your creditors by taking regular, set monthly payments from your monthly income and passing them on appropriately. Although an administration order is a free service, the court takes a percentage, usually 10%, to cover the cost of administration. You will also need to have a regular income. To apply for an administration order, fill in a N92 form at your local court. If you're not sure about it though, speak to your local Citizens Advice Bureau for help.
• If your debt problem is severe, you can still avoid bankruptcy by applying for an Individual Voluntary Arrangement (IVA). This is similar to an informal arrangement but it has more structure and there are fees involved. It gives you more control over the process, it usually lasts around five years, and you won't be declared bankrupt for credit purposes. It's important to note, though, that if you default on any of your payments there is a possibility that you will be made bankrupt.

Please note:

Although the alternatives to bankruptcy may seem more attractive, remember that any formal arrangement is still a serious matter and should be avoided if possible.

These details are provided for information purposes only and it's important to seek specialist advice before making any decision.

Useful links

• The Insolvency Service
• Citizens Advice Bureaux
• National Debtline

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