Article by Steve Jackson
Declaring bankruptcy will mean that any unsecured debt you have is written off and the pressure of constant collection letters and phone calls is immediately taken away. If you are considering bankruptcy be sure that you include all appropriate debts on your application form.
If you have debts which you cannot afford to repay, the idea of declaring bankruptcy will often be thought of as a last resort. However, for many people, Bankruptcy can be a life saver. All unsecured debt is written off after just one year and there is very little risk of losing any personal possessions.
Bankruptcy is used to deal with unsecured debt. He following debts can be included in the process:
Unsecured borrowing ? any outstanding bank overdrafts, credit cards, personal loans or catalogue/store card credit that you have.
Council tax and utility arrears ? Council tax arrears and outstanding utility debts such as electricity and gas bills can also be included.
Tax debts ? If you owe money to HM Revenue and Customs for example personal tax from a period of self employment, this debt is also written off in bankruptcy.
There are some debts however which cannot be included in the bankruptcy process. If you have an outstanding Student Loan Company debt, this will not be written off in bankruptcy. In addition, CSA (child support agency) arrears and some court fine and penalties cannot be included.
Secured debt is not written off if you declare Bankruptcy.
Car Finance
If you have a car on HP and you cannot do without the vehicle, you will often be able to keep paying the finance as part of your monthly expenditure if you declare bankruptcy.
However, if you have decided that you no longer need the car, then you can simply stop making the payments. The car finance company will repossess the vehicle and claim any shortfall on the finance from you. This outstanding debt can and must be included in your bankruptcy
Mortgage debt
If you are a homeowner with an outstanding mortgage, this debt cannot be included in bankruptcy. Your mortgage is secured against your home. This means that if it is not paid, the mortgage company can repossess your property and sell it in order to get their money back.
If you have equity in your property, bankruptcy will generally not be an option for you as it is likely that your home will be sold to release this for the benefit of your creditors.
However, if you are struggling to pay your mortgage and have made the decision to hand the keys to your property back to the mortgage company, then any potential shortfall in the mortgage after the house is sold, is written off if you declare bankruptcy.
Bankruptcy is often treated as a last resort for dealing with debt because of the negative image that it conjures up. However, for many people bankruptcy is absolutely the right decision.
The process can be used not only to write off normal unsecured debt but also debts that are left after a vehicle or property is handed back to the mortgage company.
If you have a serious debt problem, you should familiarise yourself with the bankruptcy option. Used in the right circumstances, 100% of your debt will be written off which would otherwise take many years to repay.
Steve Jackson is a debt adviser from BeatMyDebt.com in the UK. For more quality and unbiased information on Individual Voluntary Arrangements, visit our website at http://www.beatmydebt.com
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