What is bankruptcy?
If you can’t pay your debts as and when they fall due, or if what you owe exceeds the value of your assets, then you’re insolvent. Bankruptcy is a formal court procedure, which you can start yourself. If one of your creditors is owed at least £5000, they can start it instead.
In a bankruptcy, your assets will be sold to pay off your creditors – this will usually exclude your personal belongings, the contents of your home and the tools of your trade; but if these have a high value, they may go too.
Other than the obvious loss of property, bankruptcy can carry some heavy consequences, including a damaged credit rating and frozen or closed bank accounts. You also won’t be able to act as a company director.
With this in mind, bankruptcy should probably be your last resort. You might be able to take another route, like an IVA, under which you may be able to stay in your house, continue to trade your business or remain as a company director.
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