Pros & Cons of Bankruptcy

Sometimes bankruptcy can seem to be your only option for some people, but there are a number of alternatives, such as IVA or Debt Management which you should consider before making your final decision.

Below is a list of the basic Pros and Cons, but you need to seek expert advice before you decide to declare yourself bankrupt. Debt Helpline may be able to offer you alternatives to Bankruptcy, call us free on 0808 131 9113.

Bankruptcy Pros:

• All your debts are written off, and you should become debt free within 12 months thus giving you a fresh financial start.
  (Although you may make an additional three years through a binding Income Payments Order which is issued by the Court.)
• Bankruptcy will put to an end creditor phone calls and letters, as it is all dealt with by a third party.

Bankruptcy Cons:

• All assets will be sold to your creditors in order to meet your unsecured debt commitments, including your home.
• Any spare income will be paid to your creditors.
• It may hinder your future career prospects as some jobs won't accept bankrupts.
• Details about your Bankruptcy will be in the public domain.
• Your credit rating will take years to rebuild, as the bankruptcy order will remain on your credit file for six years.
• If you wish to gain credit in excess of £500 then you must declare that you have been made bankrupt.

Entering into an IVA may adversely affect your credit rating for up to six years from the date of approval.

Your property will be protected within an IVA but you may be required to release all or part of any equity during the period of the arrangement.

Failure to complete the term of an IVA can result in bankruptcy.

(In Scotland, a PTD is the equivalent to an IVA.)