If you’re struggling with insurmountable debts in the UK, you should know that you’re not alone in the current climate.
This is why a growing number of people are taking the drastic measure of declaring themselves bankrupt as a way of dealing with their insolvency. Whilst this is not the right solution for everyone, in some instances it can offer a fresh start and a clean break from your historic debts.
If you’ve considered your circumstances, sought independent advice and decided that bankruptcy is the right option for you, read on to learn about the broader application process and the cost of pursuing this.
How to Apply for Bankruptcy
Once the time has come to kick-start the bankruptcy process, you’ll need to complete an online application.
This can be done through the Gov.uk website, which allows you to save your information and work through application process gradually.
At this point, you’ll also need to pay a total fee of £680 to process the application online. You won’t be able to get this cash back either, unless you decide to cancel your application before submitting it.
This sum comprises an adjudicator fee of £130 and a total deposit of £550, whilst you can also pay this off in any number of instalments (so long as each payment is a minimum of £5).
The only instance in which you won’t have to pay these costs is if your creditors apply to make you bankrupt, rather than you pursuing this course of action independently.
Considering the Additional Costs of Bankruptcy
If your financial circumstances are so dire that you’re unable to cover the cost of applying for bankruptcy, you may be able to seek help from a national charity or a grant fund such as Turn2us.
Whilst this may increase the length of time taken to complete an application, it may be necessary if your financial resources are especially depleted.
Not only this, but there are other costs associated with bankruptcy too. For example, you may need to pay professional fees for solicitors in some instances, whilst also covering the charges applied by trustees and accountants.
You’ll also be required to cover any other administrative costs incurred by your bankruptcy, whilst funding the sale of your home and other assets if you don’t have enough cash in your estate to achieve your objectives.
In instances where your bankruptcy estate doesn’t have enough cash or assets to cover these costs, you won’t be required to pay them at all, as this should provide at least some peace of mind in the worst case scenario.
What Else Do you Need to Know?
The process of applying for bankruptcy can be both arduous and time-consuming, whilst you’re likely to spend at least 12 months as an ‘undischarged bankrupt’.
During this period, there will be restrictions placed on your employment and credit applications, so it’s important to ensure that you’re fully prepared for the process.
Initially, there will also be a period of several days between your bankruptcy order being granted and the official receiver seizing control of your assets.
At this point, your bank and building society accounts will be frozen, so you should consider withdrawing some cash to fund your living costs before completing the online application.
Once the bankruptcy order has been made, it’s also your duty to cooperate fully with the official receiver. They’ll contact you within two weeks of the order being granted, and you must provide them with all the information they require to oversee your bankruptcy case.
If you fail to provide this, the court may decide to suspend your discharge and extend the bankruptcy process indefinitely. This can be both harrowing and costly, so strive to be honest and open with the receiver at all times if you want to start planning for a more positive future.
What does this mean for my Credit Score?
There is no doubt that going bankrupt will have an effect on your credit score. Your credit score is likely to display defaults and will have a record of bankruptcy assigned to it so any potential lenders are made aware of this if you are applying for a loan with them.
Unfortunately, as there is no such thing as being able to apply for a loan without a credit check it is likely that many lenders may turn you down for future credit, or insist that you have someone who is prepared to act as a guarantor.