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Bankruptcy is often considered the last resort for people struggling with debt because there are other debt solutions to consider first. It is a legal declaration for people who cannot afford to pay their creditors. A state of Bankruptcy can be declared by creditors in an effort to reclaim in part money that is owed to them. A majority of Bankruptcy cases are initiated by the individuals who feel they cannot pay their debts.


Bankruptcy can occur when an individual’s debts are greater than his or her assets. Declaring bankruptcy means an individual is financially insolvent and can be relieved of outstanding debts. It is often considered as a last resort for people with serious and ongoing debt problems.


The bankruptcy proceeding has two aims:


To free the individual from the pressures of creditors (people they owe money to) and to enable him or her to make a fresh start.


To ensure that all assets (such as property and investments) are distributed fairly among the creditors.


The Courts are officially responsible for making a bankruptcy order against an individual, although this is done at the request of either the individual or one of his/her creditors.

The assets of the bankrupt individual then fall under the control of a trustee. This will be either the Official Receiver (a civil servant and officer of the Court), or a licensed Insolvency Practitioner. Whoever is appointed becomes responsible for uncovering as much as possible about the debtors assets and liabilities and then maximising returns for the creditors from the assets available, within certain guidelines.


Once a bankruptcy order has been made against you your creditors can no longer pursue you for payment. Payment becomes the responsibility of the Trustee.


What are the disadvantages of bankruptcy?


No more credit


Whilst you are bankrupt, you can’t apply for more credit.



If you own your own home, it might have to be sold (but you may be able to apply to your local authority for re-housing).