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Bankruptcy Conditions - part 2

Posted 01 November 2015 by Christine Walsh

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Do you understand the restrictions of bankruptcy? Read on to find out what would be expected of you if you went down this route.

Welcome to part two of this blog. Today we'll look in more detail at the conditons you'll have put on you while you're in bankrupcty. So let's crack on. 

 

Conditions during bankruptcy 

As we mentioned, when you choose to go bankrupt a Trustee is appointed to oversee everything. Your finances will be looked at in detail and if you do have some spare income, something called an Income Payment Agreement will be set up and you’ll pay whatever you can afford every month to your creditors. These payments usually last for three years.

Your Trustee will have guidelines already in place to check whether you can afford to pay anything into the bankruptcy. These guidelines look at what incomings and outgoings and whether an expense is essential or non-essential. Bills, rent and child maintenance would be examples of essential expenditure, while cigarettes, satellite TV and hobbies would be examples of non-essential expenditure.

Bear in mind though, that you won’t have to pay anything into the bankruptcy at all if all your income comes from benefits.

There are also some restrictions in terms of the jobs that you can do. You wouldn’t be able to act as the director of a business or create or manage a company while the bankruptcy is ongoing. Bankruptcy may not be the best solution either if you work in finance in general. So if you’re a solicitor, accountant or work in a bank, there might be a clause in your employee contract that means you wouldn’t be able to carry on doing the job, if you were declared bankrupt. If you’re considering this, make sure you check your contract with a keen eye, if your job would be impacted, as it might be best to look into an alternative. If a creditor is trying to force you into bankruptcy, you should seek advice from someone like us or The Money Advice Service as soon as possible.

It’s not advisable to borrow more while you’re bankrupt as this is very unlikely to be responsible borrowing, and if you tried to borrow more than £500 and didn’t disclose that you were bankrupt then you would be committing an offence.

Bankruptcy is legally binding and if you break the restrictions, you could be prosecuted. Of course, if you’re unsure about anything, or want to make sure that you’re allowed to do something, your Trustee is always be there to ask.

Advantages

While there are strict restrictions with bankruptcy, it would be a mistake to dismiss this solution altogether simply because you’re nervous about them, especially if a debt expert had advised you to go down the bankruptcy route

After the bankruptcy is over, if all has gone to plan, your remaining debt will be written off, giving you a fresh start. If the bankruptcy goes ahead, your creditors are not allowed to chase you for payment anymore – that stress will be completely taken away. So remember bankruptcy could clear your debts entirely and provide an enormous sense of relief too.

Don’t worry, you’re never expected to make this kind of decision without help and guidance. The Money Advice Service have lots of info about this, and other debt solutions, and if you fancy chatting it over with an expert then give us a call – our advisors are ready and waiting 

by Christine Walsh

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.