Consequences of Bankruptcy

Bankruptcy effects & advice

Financial consequences

The debtor’s finances ultimately suffer the most at the hands of bankruptcy. You lose all control of them including your assets. The bankrupt will also be unable to receive any credit that is over £250.

Legal consequences

If the trustee feels that the debtor has behaved in a way that is deemed dishonest, or is to blame in some way or another, even before or during the order of bankruptcy, they can report it to the Accountant in Bankruptcy. Examples of bad behaviour include

• making debts knowing that they could not pay them off;
• giving away assets or selling them for less than their value, or;
• not co-operating with the trustee during bankruptcy.

The Accountant in Bankruptcy has the power to seek restrictions on the debtor’s behaviour which can last between 2 and 15 years. If this is put into action the implemented restrictions are recorded on the Register of Insolvencies.

Credit consequences

The credit rating will be affected for 6 years which does not concern or regard the Official Receiver or trustee to have any kind of influence.

Social consequences

When somebody becomes bankrupt their status is made public which may cause embarrassment as well as other possible consequences. Due to the perceived stigma associated with bankruptcy being made public, it is common that people refuse to go into it even if it is the best solution to their debts. This may then lead to more negative repercussions due to choosing a different alternative.

Banking consequences

The bank has the power to close someone’s account if they are declared bankrupt. The debtor must inform the bank that they are bankrupt. Some banks however can allow the debtor to have an account although if they have any savings they will be transferred to the trustee.

Business consequences

The two main implications to your business as a result of bankruptcy are losing your professional status and being forced to stop trading. This not only has damaging consequences in the short term but it may also hinder future employment prospects.

Family consequences

Bankruptcy would not usually affect family members unless you hold joint bank accounts or share a business for example. If they do not share any assets the debtor can file for bankruptcy alone.

Utility consequences

Gas and electricity providers for example can decide to change the payment plan of a debtor as they may be worried about future payments. For example they may choose to install a meter or set up a pre payment plan.

Health consequences

Anxiety and depression are often linked with debt. Levels of seriousness will vary but health can be greatly affected in certain cases.

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Living with bankruptcy

Bankruptcy is the legal status that a person or organisation enters into when it can no longer pay its debts and honour its obligations to its creditors.

Declaring yourself bankrupt

When an individual realises that they are about to go, or perhaps have already gone, bankrupt it can be hard to know where to go or what to do.

Bankruptcy solicitors

Facing bankruptcy can be a frightening experience. There are many complications involved that may leave you feeling confused and not knowing where to turn. Having a solicitor to guide you through the process can bear huge benefits.