Here is a useful guide to bankruptcy. It should be noted that bankruptcy is not to be entered into without first having sought professional advice.

Bankruptcy is seen as the last resort. Bankruptcy is perceived to be the only way to escape the ever-constant demands for payment by bill collectors and credit companies alike.

Bankruptcy is not something that should be rushed in to. Certainly there are times when it can be very useful, but there are other times when declaring bankruptcy would be a big mistake.

The purpose of bankruptcy is to convert your possessions, and any wages you receive, into lump sum and instalment payments for creditors. A debtors purpose to apply for their own bankruptcy is to form a moratorium (a group of creditors) to agree part repayment of all outstanding debts, and when the agreed repayment has been met, to have a clean slate'.

The constraints which are put upon you once you are declared bankrupt make it only a viable option in the most extreme of cases. It is more likely that an Individual Voluntary Arrangement will be the answer to severe debt problems, since it provides much of the relief offered by bankruptcy but without the severe constraints which bankruptcy imposes.

Individual creditors cannot take action against you. They must make a claim through the trustee' (the name of the person who controls a bankruptcy) or write off their debt.

When appointed the trustee will advertise your demise in a number of newspapers to give all of your creditors a chance to make a claim against the bankruptcy.

It is also the responsibility of the bankrupt to make an honest list of all creditors: as a bankruptcy is also a chance to start again the bankrupt should ensure every creditor is notified. Not that a creditor could make a claim against you after a bankruptcy, but it will get all your creditors of your back.

A bankruptcy order takes precedence over all other forms of debt recovery. All creditors have the right to be included in the list of creditors, and benefit from any payment arrangement.

If you own your home you would be fortunate to keep it. You can keep household essentials' such as, bed, fridge, heating appliances but not, TV's, video recorders, computers - unless used for work, or used to get work.

All tools of trade' are protected, but will be scrutinized.

A bankruptcy will normally last until the third anniversary of the bankruptcy order. During this time you are not allowed to hold a public office, become a company director (or in all but name run a business) and you must not apply for credit over 250 without notifying the lender of your bankruptcy.

Your credit file will show your bankruptcy for six years from the bankruptcy order.

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