The Pros and Cons of Filing for Bankruptcy

It is important to understand what the pros and cons are before following through with a bankruptcy filing:

Positive Aspects

1. You get a clean slate. Depending on the type of filing, your existing unsecured debts are forgiven and payment schedules for secured debts like mortgage are created to facilitate making the payments.

2. It stops the harassment. Creditors and collection agencies love to call day and night demanding their money and this can leave you feeling overwhelmed. Once your filing is in place, they can no longer harass you. All communications will go through the court or your attorney.

3. Save your home from repossession. Because a plan is devised to make payments that the bank, the court and you agree to, you don't have to lose your home, car and other items that are essential to daily living.

4. No more credit cards. All of your credit accounts are closed so the temptation is eliminated. Now you have the opportunity to new learn a new way of life that will benefit you once you are allowed to apply for credit again. You learn to budget and save for big purchases instead of charging it.

Negative Aspects

1.Your credit is shot. For 10 years, your bankruptcy will be a red flag on your credit report. It can prevent you from buying or renting a home, buying a car, getting insurance and definitely no lines of credit.

2. You lose all of your credit cards. It will take many years to rebuild trust with creditors before you will ever get another card. This is not necessarily a bad thing, but in a society that deals with plastic, it can hinder certain purchases. Along with credit cards, you may have other non-essential items repossessed and sold by the court to cover some of your debt.

3. It becomes public knowledge. There is a stigma attached to the word bankruptcy and if you file, a public notice must be placed in the local media for all to see. No matter how you got in this position, people will make their own assumptions.

4. Not all debts are discharged. Your student loans and back taxes are not discharged. If you want to keep your home, you devise a payment plan to keep it.

No matter how you got into this situation, sometimes there seems to be no way out. An experienced legal bankruptcy professional can help you weigh these issues and come up with the best plan for your situation.

Getting a Mortgage After Bankruptcy

Mortgage after Bankruptcy - The First Steps

Getting a mortgage after bankruptcy will not be easy but this does not mean that it is completely impossible. Obtaining the mortgage after bankruptcy will depend on the other aspects taken into account during your mortgage application. Obtaining a mortgage after bankruptcy will heavily depend on your guaranteed income and the amount of money you have as a deposit. So your first steps will depend on your ability to provide both of these things.

Mortgage after Bankruptcy - Some Tips

Following bankruptcy many lenders will not lend to you for a period of at least two years from the time of the bankruptcy discharge. From this two year benchmark onwards obtaining a mortgage after bankruptcy will become much easier. The best way to ensure that this happens is to correctly manage all your debts from the time of bankruptcy discharge onwards. This means paying all of your repayments on time and building up your credit rating. Some other mortgage after bankruptcy tips include:

Timely Payment - If you are looking to get a mortgage after bankruptcy in 2 years or under from the time of the bankruptcy discharge, you will need to have a near perfect payment history since your bankruptc

y discharge. This means continuing to pay off debts such as your home and cars that were not discharged in the bankruptcy.

Deposit - The chance of gaining a mortgage after bankruptcy is greatly increased by the amount of deposit which you have to put down on the house. As little as a 3-5% deposit may be enough to help you get approved.

Limit Further Debt - By limiting the amount of other debts such as credit cards or bank loans you are increasing your chances of obtaining a mortgage after bankruptcy. Remember that your debt-to-income ratio will be evaluated by the mortgage providers so all further debt should be limited as much as possible.

Credit Report Check - Don't presume that the information on your credit report is automatically correct. It may contain mistakes and should be checked for accuracy. You can often request a free copy of your credit report through credit monitoring companies and credit reporting agencies. Remember that every inaccurate piece of information contained within the report may work against you. Report any mistake found as swiftly as possible. This will speed up the corrections within the report. By keeping an eye on your credit report you are ensuring that the creditor's view of your credit history is a fair one. The removal of any inaccurate information will help establish a more favourable debt-to-income ratio.

Avoiding Bankruptcy

Avoid Bankruptcy through an IVA

An IVA is a legally binding agreement between your creditors and you to repay a just percentage of your debt over a period of time, usually 5 years. After the 5 years, you will have avoided bankruptcy and be debt free.

Not only will you avoid bankruptcy, you may also be able to keep your house. The downside is that the payments will be demanding and your credit rating will be severely damaged for six years. You may also need to re-mortgage your property.

Avoid bankruptcy through a Debt Management Plan

This is an informal arrangement between your creditor(s) and yourself where they will accept reduced repayments allowing you more time to repay and therefore avoid bankruptcy. The danger with this type of solution is that it is not legally binding and there are many unregulated companies arranging this solution simply to profit their business.

A DMP will not formally reduce the amount that you have to repay. Further to this, interest may not be frozen and charges may continue to be added. Defaults will also continue to be added to your credit file. This will seriously affect your credit rating, although it may help you to avoid bankruptcy. As a guide, if you are not using a debt management plan to demonstrate your suitability for an IVA and it takes you longer than 5 years to clear your debt then you may wish to consider an alternative solution.

Using a loan consolidation to avoid bankruptcy

Loan consolidation may help you to avoid bankruptcy. If you have built up an adverse credit history then you may not qualify for an unsecured loan and your only option may be a secured loan. Through loan consolidation you may be able to restructure your finances to reduce your total outgoings. The goal will be to start living within your means, continue to repay your debt and avoid bankruptcy.

Loan consolidation should not be taken lightly. If you do not keep up repayments on your loans then you risk losing your house, regardless of whether the debt is secured or not.
Avoiding through income maximisation

Income maximisation is not a financial product, it is good financial management that may help you to avoid bankruptcy.

Avoiding bankruptcy may be possible by maximising your income and reducing your outgoings to a minimum. This may have the effect of bringing you back within your budget and opening up the number of solutions available to you. Examples include a consolidation loan to reduce your financial repayments, switching service providers to reduce bills and increasing your income.

Personal Bankruptcy
Is Bankruptcy right for me?

A fear resulting from a lack of knowledge about bankruptcy all too often causes people to dismiss the option of bankruptcy out of hand. Would you benefit from the protection of going bankrupt

Suitable circumstances for those who might benefit from entering into the protection of a Bankruptcy Order:
• People with no assets (including those with no equity in their property)
• People living in either rented accommodation or with friends and family
• Those whose employment would not be lost or adversely affected by a Bankruptcy Order
• People who agree with the moral aspect of bankruptcy
It is a generally supported but false view that the personal bankruptcy is punitive and that the bailiffs will seize all your goods and furniture leaving only a change of clothes. This is false. You enter the protection of an Order of Bankruptcy to be protected from creditors and to allow you to clean the slate clean and get a fresh beginning. Under the Section 283 (2) of the Insolvency act you are allowed to keep the instruments of commerce, all clothes, furniture, and even your car (provided that it is not too expensive and subject to certain conditions).

The law changed in 2004 and the mandatory period required to serve under the Bankruptcy Order was reduced from 3 years to 1 even if you have been Bankrupt before. However, Bankruptcy is no longer a punitive action and is there to allow discharged Bankrupts the opportunity of rebuilding their lives. In many cases, Bankrupts can be discharged from Bankruptcy in as little as 3 months at the Official Receiver’s discretion. An early discharge is possible provided no creditors object. For those granted an early discharge, the average discharge period is around 7 months.
Established in 1998, this website has assisted thousands of individuals who have visited this site looking for a debt solution and someone to assist them with clear information and speedy and direct assistance. We hope that you are able to find what you are looking for and always welcome your comments on how we may improve our services. Bankruptcy Information UK offers a whole of market service and sometimes your call will be referred to a licensed 3rd party or Licensed Affiliate to assist you.

Your Choices
There are choices for anyone who is experiencing difficulties in either their financial or trading position:

1. Do Nothing
This is usually an option if you feel that your circumstances may well change for the better fairly soon and you don't want to enter into an arrangement that may be costly, if only to hold your creditors back for a limited period of time. This is only an option if you are confident that your circumstances are going to change for the better. If you do nothing and you have no exit strategy then you may leave yourself exposed and your situation may well get worse. It is better to be pro-active than re-active.

2. Consider Bankruptcy
Often bankruptcy is the fastest and cheapest way out of debt. Bankruptcy should be considered if you have no assets to protect, live in rented accommodation or a mortgaged property in negative equity, and are in employment that will not be affected by Bankruptcy. Please contact one of our consultants if you are in the Armed Forces or work in the Police Force or Emergency Services and we will go through your options.

3. Consider an IVA (Individual Voluntary Arrangement)
IVAs were originally designed to provide relief to debts generated as a result of business insolvency. In recent years, increasing levels of consumer debt has led to many insolvent individuals with non-business debt seeking the legal protection offered within an IVA. IVAs are usually appropriate where you have assets to protect or your employment or moral beliefs regarding your debt situation make Bankruptcy an unsuitable option. It may be that you have special reasons for not wanting to enter into Bankruptcy in which case an IVA is a suitable debt solution to consider. Please contact us now to discuss with one of our advisors.

4. Consider a Debt Management Programme (DMP)
You may like the idea of a Debt Management Company handling your creditors for you. With one monthly payment, they will write to all of your Creditors and request that interest be frozen and distribute a proportionate amount to each of your Creditors. You have access by telephone to your Debt Management Company and do not have to wait to see someone. There is a high level of anonymity of a telephone service run by a Debt management company. This relieves you from having to contact your creditors directly as the Debt Management company liaise with your creditors through the Debt Management Plan.

Bankruptcy from Abroad
Wherever you are now living in the world, an agent from Bankruptcy Information UK can assist you in declaring yourself Bankrupt, without returning home.
You can declare yourself bankrupt without returning to the UK, so wherever you are located in the world, the bankruptcy website can assist you get the job done.