Bankruptcy or Drawdown?

You may choose to make yourself bankrupt if repaying your debts is no longer realistic. Any property you own may be sold to repay your lenders with the exception of pensions funds that are excluded from your estate.

During bankruptcy you may earn or receive comprehensive living expenses although any disposable income above £10 a month may be paid to your lenders for up to 3 years. If you are on benefits you will be able to keep them all.

Advantages of bankruptcy

  • Your debts are written-off* including:
    • Bank loans & overdrafts;
    • Credit & store cards;
    • Hire Purchase agreements;
    • Mortgages & outstanding repayments;
      • Subject to status, mortgages are generally protected within the Insolvency Act. Bankruptcy does not mean that you lose your home.
    • Money owed to family & friends;
    • Outstanding rent (this however may lead to the landlord seeking to recover his property).
    • Legal bills;
    • Personal Guarantees;
    • Any form of tax.
  • Pension Funds are protected although income from them is not during the 3 year term before discharge;
  • Generally you can retain all household items including tools of your trade. You may also keep a vehicle up to a value of £2,000. A vehicle supplied as a part of employment is exempt from this rule;
  • A matrimonial home may be protected within the rules, your advisor will be able to help you with this.

Your personal bank account will be closed. This will also have an effect on joint bank accounts. We will advise and assist you to re-structure your private finance prior to bankruptcy.

You will be expected to declare assets that have substantial value, i.e. jewellery, antique furniture, paintings, etc. However you should remember that your spouse may have a claim against such items. We can discuss this further during the consultation.

* The exceptions are student and social loans, Court fines and CSA payments.

Occupational constraints

Some professionals are barred from practice for a year due to the nature of their work. We will identify alternative routes if this presents a problem. We have successfully assisted medical professionals, practising legal professionals, civil servants, teachers, serving fire and police officers. In most cases, these individuals have been allowed to continue with their chosen profession.

Pensions Drawdown

The protected status of pensions in bankruptcy is to reduce family destitution in retirement. It is your choice if you wish to draw down pension funds to pay off debts.