The Cost of Bankruptcy

Take a close look at the financial and social costs involved with bankruptcy.

If you have begun to research how to declare bankruptcy to bail you out of a dire debt situation, you know the benefits you are looking for. Bankruptcy is a tool that will wipe out your debt so that by the end of the process, you are essentially debt free. Now there are some kinds of loans that are not resolved by bankruptcy like education loans, tax related debt or secured loans. But bankruptcy can neutralise your credit card debt, unsecured loans, finacial agreements (like car finance) and many other types of debt that threatening to overwhelm you and you family.

But bankruptcy can be a damaging financial step. With any financial maneuver, you have to count the costs. That is certainly true when you begin to go down the path toward declaring bankruptcy. You may go ahead with the process even after you learn the costs. But its best to know up front what you are getting into so that when you must endure the negatives about bankruptcy, they can be balanced against that huge relief you are feeling because your debts have been removed.

If you're considering bankruptcy speak to a professional bankruptcy advisor or call Debt Response now on 0800 781 7878.

Financial Costs

The short-term costs of a bankruptcy are in the form of fees you will pay to your legal and financial advisors to take you through the process. There will also be filing fees and other costs that should be considered before you begin the process. When you are considering potential advisors to help you with your bankruptcy, they should be able to detail these costs up front so you are aware of what you are paying for their services and to the courts to process your bankruptcy.

There are a number of costs associated with the fully-packaged bankruptcy services available through Debt Response including:

• Court costs
• Administration fees
• Consultation fees
• Official Receiver representation
• Court representation
• Home visits
• Full packaged assisted service available

For a full cost breakdown please call us free 0800 781 7878.

Lose of Assets

You will also lose some assets in a bankruptcy settlement. When the courts have you document your debt and assets, the biggest decision they will make is whether you are eligible for bankruptcy and how much of your assets can be liquidated to pay your creditors before those open accounts are closed and the remaining debt retired. When you go into the bankruptcy process, you are agreeing that any assets the courts determine should be sold or absorbed to pay your debts will be handed over.

Now the courts will only attach assets beyond what you need for your basic living requirements. That means they probably will not take your home, your vehicles needed for getting to work and caring for your children or necessary personal property. But if you have a second home, more cars than you need or luxury items, you can expect those to be confiscated and sold to help pay off the outstanding debt to your creditors.

Affect on Credit Rating

The biggest cost by far, however, is the loss of your credit rating and how that will impact your life for as long as that bankruptcy remains on your credit report. While the bankruptcy itself will only freeze your credit for five years, the event can stay on your credit report for as long as ten years and you will have to declare on certain forms that you have previously been made bankrupt.

That means that you may have trouble getting certain jobs, renting an apartment, getting insurance or even signing a mobile phone contract. Each of those events involves your credit report. And if the decision makers who you are working with decide you are a poor risk, that can cause them to refuse to do business with you. So the best course of action is to stay with the same financial service providers and make a concerted effort to manage your finances as efficiently as possible.

These are significant negatives to going through a bankruptcy. The bankruptcy event will be public knowledge because it is published in the paper when you file for bankruptcy. So you will have some embarrassment and loss of public standing because everyone will know your business. But be courageous and start the day after your bankruptcy to rebuild your credit, your reputation and even your public standing. It might take time but you can do it. And when you have recovered all of those things, you will be much more guarded about ever risking those problems again over credit.

Married couple and business partners

If a married couple are applying for bankruptcy they will be required to pay separate fees. This is also the case for business partners unless they apply for a joint bankruptcy petition.

How are fees paid?

All fees should be paid in cash or postal order or by a cheque from a building society, bank or solicitor. Due to the bankruptcy restrictions personal cheques will not be accepted.

Although the financial cost of bankruptcy is relatively low it can often be a struggle when debts are high and creditors are chasing payments. Speak to a professional debt advisor today to see if bankruptcy is the right choice for you.

Any information you provide will be kept completely confidential.