Disadvantages of Bankruptcy

The downsides of going bankrupt

Bankruptcy has numerous disadvantages, which are both short and long term. If you have the luxury of being able to decide on bankruptcy or not you must, familiarise yourself with all associated disadvantages:

1. Firstly, your loss of credit is a major drawback, especially in the long term. If you wish to obtain any credit of £500 or more, you have to declare your bankruptcy. Even after your bankruptcy period it is expensive and difficult to acquire.
2. If you own a business, it will be immediately shut down once a bankruptcy order has been made, meaning your employees will be dismissed. This will also prevent you from being involved in the forming, managing or promoting of a new company without permission from the court, and you can only do it trading under the same name.
3. You are also very likely to lose assets such as your home and car. These assets are handed over to your trustee (Official Receiver) once you have been declared bankrupt. In the case that you are renting or hiring a product, it will be returned to the owner.
4. As well as losing your business you also lose your business and professional status when you have been declared bankrupt, which means your employment prospects will be tarnished. Employers may refuse to employ you simply based on your history and there are even roles which you are not permitted to hold including a councillor, an MP, a real estate agent, a magistrate and a director of a company. Every bank and building society account you may own will also be closed and any credit cards you own will be confiscated.
5. Your bankruptcy will also be divulged by the local press - details are published in the local paper and also in the London Gazette. This means people are going to know all about your circumstances and sometimes the worst part is the stigma attached to declaring yourself as bankrupt whenever you carry out a certain transaction.

If you suffer from serious debts bankruptcy may be the only option. However, if your debts are small then you may qualify for an Individual Voluntary Agreement, which has various advantages. To find out more on these advantages visit our section on Bankruptcy vs IVA.

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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.

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 in the UK

To hear the words ‘bankruptcy’ in the UK a decade ago would be frowned upon by most. Being declared bankrupt was the very last resort and something of a rarity.