Bankruptcy advice

Before embarking on any debt solution it is crucial to obtain advice, bankruptcy is no different. Many people start bankruptcy proceedings without seeking advice first. Whilst some do not seek bankruptcy advice and the outcome is as expected, others experience some unexpected consequences. Advice is crucial even if you consider bankruptcy to be your only option.

There are many organisations and individuals that offer help but deciding where to go isn't always easy. I've included some information below to help.

Does advice cost?

Here lies the big conundrum. Within the debt advice market there are both fee charging and free organisations. Ultimately, the advice that you get is only as good as the person you get it from. This renders the cost irrelevant, other than the fact that professional advice will usually cost.

If you have to pay for the best advice regarding bankruptcy, then in my honest opinion it is worth it.

What advice should you seek?

Ideally you need someone to review your financial position and suggest the best course of action for you before you go bankrupt. If bankruptcy is your best option, then the process should be explained in relation to your particular circumstances. Following that, you may need advice with any matters that arise during the bankruptcy. This may be handled by your adviser or you may need to be referred to a specialist such as a solicitor.

With budget constraints there may only be so much advice that you can afford or that organisations can provide for free. To that tone, you should also do what you are doing now: research!

What about recovering from bankruptcy? Most of the answers about life after bankruptcy will probably come from your research but always ask your advisor if you have questions.

Why is bankruptcy advice important?

Bankruptcy advice is important because bankruptcy is a legal process and is very often mis-understood. It is important to understand that your behaviour before and during your bankruptcy can affect the outcome.

Bankruptcy starts with you filing your bankruptcy forms at court, which are assessed by the Judge and will be used during the investigation into your affairs. Once the order has been made it will probably be too late to go back. Therefore it is essential that you seek advice for the following reasons:

  • To make sure that it is your best option and there is not a more suitable alternative
  • To make sure that there are no nasty surprises for you during the bankruptcy
  • To know how to conduct yourself during the bankruptcy
  • To minimise the consequences
  • To remove the uncertainty

Qualifications, experience and scope

By far the most important factor in the advice you receive is the ability of the person providing it. To give you confidence, they should be able to demonstrate their qualifications and experience.

Further to this they should preferably be able to advise on the full spectrum of solutions and most certainly act within the scope of their profession regarding regulation and codes of conduct.

At a bare minimum, the adviser should be able to prove that they are working under someone who does hold suitable qualifications.

More details about qualifications below.

Research the organisation

It's always worth researching the organisation. Try and find out if they have fallen short of the regulators in any way. However, remember that the advice you receive is only as good as the person providing it to you. Debt advice is a regulated activity and as such the organisation will highly likely need to be authorised by the Financial Conduct Authority. You can search their register to see if the firm is authorised.

Who can offer the best advice?

The best place to seek advice specifically on bankruptcy is a person qualified in insolvency, who practices insolvency and who is up to date on the law. An example would be a licensed insolvency practitioner. There are plenty of them in the UK but, if they agree to help you, they will most likely charge. Licensed insolvency practitioners and Insolvency solicitors usually reserve themselves for fee earning opportunities. They are appointed to roles such as trustee in bankruptcy and corporate matters. Some do specialise in individual voluntary arrangements, but rarely will they advise on simple bankruptcy cases.

However, if your bankruptcy is contentious, then you will certainly want to consider help from a licensed practitioner or insolvency solicitor. As always, do your research to find out who you need.

Who else offers advice?

It is not just licensed insolvency practitioners who are qualified. A small number of insolvency qualifications are available for all in the debt advice market. The two that spring to mind are:

  • Certificate of Proficiency in Personal Insolvency (CPPI) - Insolvency Practitioner's Association
  • BTEC Advanced Certificate in Debt Resoultion (CertDR)

It is the CPPI that specialises in bankruptcy and iva's.

You should aim to get advice on bankruptcy from qualified individuals who keep up to date with the law. The type of organisation they work at isn't as important as the proof of their knowledge, skill and experience. In my opinion, that is what matters. Whilst you may have to pay a fee for such advice, in my opinion it can be worth it.

What about debt management companies?

In recent years debt management companies have been pressured to up their standards. However, the same rules apply, check their qualifications and experience. Some companies charge to offer advice on bankruptcy, without any credentials. Be very wary.

Bankruptcy can be very complex and, in my experience, taken far too lightly by the debt advice sector. My preference would be to find someone suitably qualified to help. Although bankruptcy can be simple, it can become a mess.

If you have not sought debt advice yet, find someone qualified and reputable.

Advice at charities

There are a number of charitable organisations that offer debt advice. They may mean well setting up to offer an alternative, usually free service, but the same rules apply. Check the qualifications and experience of the person advising you.

Is there bad advice?

Unfortunately yes. Many organisations do not provide bankruptcy advice because they do not profit from it. As a result you will only hear "Avoid bankruptcy at all costs". Even worse are the organisations that pretend to give bankruptcy advice and charge high fees. In the past a number of companies have been closed down by the courts because of their illegal or unethical practices.

How can bankruptcy advice help me?

Bankruptcy advice should prevent you from making comments such as:

  • "I didn't know they would want money back that I paid to my family"
  • "I didn't know that there are ways I could keep my house"
  • "I didn't know that I couldn't do that, now they deciding whether to prosecute me"
  • "Why has my discharge been suspended indefinitely?"
  • "I never knew that they would want some of my income for 3 years"

Sadly these are not myths and they are heard of, usually because people do not find out until it is too late to do anything about it.