What is bankruptcy?

Understanding what bankruptcy is really about

If you are considering bankruptcy then it is really important that you understand what it is about. The problem is that most people, including many advisers, do not truly understand the nature of bankruptcy and its consequences.

In the next few paragraphs I will explain the nature of bankruptcy and some of the key considerations that you should have. It is important that you grasp this understanding to gain a true insight because bankruptcy is far from being just a list of consequences. Bankruptcy can offer a viable solution to your debt problems but at the same time it can create some unexpected problems.

Although what you will read below is important you can start finding out about the bankruptcy process by visiting the going bankrupt page.

If you feel that you require immediate help with bankruptcy then please go to the bankruptcy help page.

In its simplest form bankruptcy can be viewed as a way of wiping your debts to obtain a fresh start. It is often cited as an easy way out of debt. The good news is that you can wipe out the bulk of debts. The bad news is that you do not always get a fresh start and it most certainly is not an easy way out for all. In fact, you cannot always wipe out all your debt although the majority of people will. I will explain more about this later.

What will you experience during bankruptcy?

As someone who has experienced bankruptcy personally, is qualified and has also helped others with their bankruptcy I can assure you that each person will have a different experience. There are two extremes. Some of you will go through bankruptcy and the experience will be as expected, with hopefully not too many problems. For others it can turn out to be more problematic. Factors that can make a difference to the outcome are:

• Your personal circumstances
• Your understanding of bankruptcy
• The advice you receive prior to going bankrupt
• The advice and support that you receive during the bankruptcy
• You behaviour before and during the bankruptcy

You see bankruptcy is a legal process and needs to be treated as such. It needs to be understood as such. From the date that you go bankrupt it becomes about more than just you and your debts. There is an Official Receiver who has a duty to investigate you. There is also a trustee who has a duty to take possession of your assets and sell them, which is frequently how they get paid. Both of these roles are taken very seriously as their duties are derived from law. This can mean that they may do some things that you will not like very much, but if you receive good advice prior to going bankrupt then you should at least be expecting them and hopefully be able manage the situation.

When bankruptcy gets tricky

For some people bankruptcy can get a little tricky. In the UK law is created in such a way that it is written precisely and it is expected to be interpreted as such. The fundamental flaw with this is exactly that, it is open to interpretation. What the law reads to one person could read something different to another. Bankruptcy law is not black and white. There can often be grey areas and case law develops to assist in passing judgement on those grey areas.

The problem with this is, as a bankrupt, you can be subjected to this grey area. At this stage you will probably not be in a position to represent yourself sufficiently. You will also not have the knowledge. At this stage the charities will not have the specialist knowledge required to help. This often leaves you in a vulnerable position.

It is quite often the case that matters requiring court intervention will not get there because of the costs involved. It is more likely that as a bankrupt you will be subject to the trustee’s or Official Receiver’s interpretation of the law and be asked to comply accordingly. As a bankrupt you will probably not know any different. Again, this could leave you vulnerable.

A perfect example of when you may be the subject of such pressure is when a trustee decides that they want more than 50% of the property that you believe you only own half of. Worst still, they may want half of the property that you believe your partner wholly owns. Another example is when the trustee decides to go after the payment that you made to a friend or family member before going bankrupt. There are a number of situations like this that can arise.

The key to managing these situations is information and advice. Know in advance whether there are likely to be any issues during your bankruptcy and seek advice before going bankrupt. It could save you from putting your foot in it during the actual bankruptcy or even help you avoid bankruptcy altogether. You will hear me talk a lot about information and advice throughout this website and for a very good reason, it can save a lot of stress and uncertainty for you and your family.

If you decide that you would like help before going bankrupt then please feel free to use my helpline.

Your duties, obligations and restrictions

Bankruptcy law places certain duties, obligations and restrictions upon you. They exist in order to facilitate a smooth bankruptcy, protect the public/organisations and preserve your property for the bankruptcy estate. During the bankruptcy you will be expected to abide by them. Not doing so can cause you major problems. You can read more about these on the going bankrupt page.

Family life

One aspect of bankruptcy that many advisers fail to recognise is the social impact that bankruptcy can have, particularly with regard to your family life. You may have already been struggling for years with your debts or business only to then to suffer the consequences of bankruptcy. As if this was not enough of a strain on the family the uncertainty of bankruptcy seems to make its mark. Not knowing whether the house will be taken or what the precise consequences will be can be a scary time. One way round this is through information and advice. Find out what is potentially going to happen and decide whether to discuss it with your family or others concerned before it does. This can be better than some nasty surprises later down the road.

Final message on bankruptcy

I hope that the message that you are getting here is that whilst bankruptcy offers a solution to your debt problem it needs to be taken seriously. It is about more than a list of a few consequences. What I am not saying is that bankruptcy is guaranteed to be a nightmare for you. However I am saying that bankruptcy should get the respect it deserves. It is a serious step and the consequences can be harsh dependant on your individual circumstances and how you respond to the bankruptcy process.

Above all the message I would like to get across is that information and advice are key. You need to know how bankruptcy could potentially affect you and your family before you go to court, not during the bankruptcy when it may be too late. Much of this website is dedicated to explaining what bankruptcy is, so please have a good read. Please understand though, the information contained within this website is not a substitute for advice. If you require help then please use my helpline page.

If you would like to find out more about me then please visit the about piggy page.

The going bankrupt page explains a little more about going bankrupt.