Should I File for Bankruptcy?

It is estimated that over 70,000 people a year go bankrupt in the UK. The question "Should I file for bankruptcy" is even more common now that the UK has been hit by the global crisis. Could bankruptcy become your solution? Is it a simple way out as portrayed by many? In this article, we will share our opinion on going bankrupt in the UK.

First off, if you file for bankruptcy, you will lose the home that you own. You may have to live with family/friends or start renting, if you can afford to do so. Living with someone else is a problem for many adults, plus you may have to go through some soul-baring and admit your difficulties in managing your finances. Even if you have an understanding family, it may be inconvenient to live with them as an adult. Remember: if you file for bankruptcy and you co-own your home, you may be able to stay in your home for up to twelve months.

Losing your home is not the only problem. The second issue is that if you file for bankruptcy, this will damage your credit and place certain constraints on you. First, you will have to disclose this to a potential creditor if you want to apply for more than £250 of credit; many creditors are reluctant to give credit to people who have filed for bankruptcy. In addition, you will not be able to operate a business in any name except the one you were made bankrupt in. There are a few other constraints as well. Even after you are discharged and these constraints end, your bankruptcy will remain on your record (retrievable through credit reference agencies) for at least six years. And even after that, you may still be obligated to declare your earlier history, such as if you apply for a mortgage.

Despite all of the above, if you file for bankruptcy you will also obtain huge debt relief – all or most of your debt will be written off, and you will become debt-free again. If you don't own property, then losing your home is not a threat to you. You will be able to keep living where you live now.

As you can see, there are pros and cons to choosing to file for bankruptcy. The worst part is that sometimes, it's not up to the debtor to decide. In many cases, this process is initiated by a creditor. It is very difficult and costly to fight a bankruptcy order made by a creditor. Thus, if you understand that it's best for you not to file for bankruptcy, don't let your creditors do this either. There are other steps that you can undertake, such as entering a debt management plan.