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Will bankruptcy affect my credit rating?

Effects Of Bankruptcy

Priti Shah (Debt consultant) gives expert video advice on: Will bankruptcy affect my credit rating?; Will all my debts be written off in bankruptcy?; How do you know when your bankruptcy is over? and more...

Will bankruptcy affect my credit rating?

Bankruptcy is recorded on your credit file. Anything recorded on your credit file stays on there for six years. After six years it is automatically removed. So, it is on your credit file and you're thinking; "Oh my god, I can't get any more credit." Not true. In fact once you are discharged from your bankruptcy, which is typically after one year, you can actually go out and get a mortgage. Surprised? Well you can do it. Usually two or three years after your bankruptcy you will probably be approached by lenders to take credit cards. In fact you've become a better lending proposition. Quite ironic really but now you're are debt free which means that you would have the capacity to repay any money that you would now borrow. Also, remember, if you have been made bankrupt once you don't want to do it again. Now if a smart lender realizes this then the will know you are good for the money you are now borrowing.

Will I ever have access to credit after bankruptcy?

So bankruptcy is recorded on your credit file for six years. Anything that happens financially to you is recorded on your credit file for that period of time. However, it doesn't mean that you won't have access to credit. You can actually get a mortgage once you are discharged from bankruptcy. Now generally speaking, that's the largest amount of borrowing that you are ever going to do. Once you have arranged a mortgage or perhaps got a new credit card, your credit rating is repaired by insuring that your repayments are always up-to-date. There are no late payments and there are no defaults on your file. So bankruptcy is not the end of the world. However, actually getting a credit card or getting that mortgage will depend upon your situation at that time.

How will bankruptcy affect my future employment?

A person employed, self-employed or unemployed has the right to go bankrupt. However, certain professions are affected by bankruptcy and it would not be advisable to declare yourself bankrupt if you wanted to continue in that profession. Obviously this includes people who work in the financial sector, or those that are handling client monies. You really need to get proper professional advice to make sure that you're not affected by bankruptcy depending on the kind of career aspirations that you have. One thing to note, though: you cannot be fired for going bankrupt. Bankrupt and bankruptcy is a civil right that you have.

Will all my debts be written off in bankruptcy?

All of your unsecure debts are written off in bankruptcy, some unsecure debts are, credit card debts, all loans which are not linked to any property. The only debts that aren't written off in bankruptcy are court fines, parking fines, current years council tax, and your TV license. But otherwise, all of your debts are written off in bankruptcy if they are unsecured, and you are then debt free.

How long does bankruptcy last?

With the enterprise at 2004, bankruptcy only last typically for one year. Therefore, for most people you automatically discharge on your one year anniversary and actually quite often it can be earlier. It can be anywhere between 6 to 12 months.

Does bankruptcy affect joint accounts if only one person is bankrupt?

If you have a joint account and I knew one person is going to go bankrupt, unfortunately, the entire account will be affected. Well, the correct procedure to do is to freeze that bank account and try to take half of the money, half of the two parties involved. Now, advice will be: try to separate your financial effects before one of you decide to get bankrupt.

Am I entitled to benefits if I am bankrupt?

Benefits are not affected by your bankruptcy. You are entitled to the same benefits that you had prior to your bankruptcy.

Will I lose my home if I am declared bankrupt?

Generally we believe that if you declare bankruptcy then you will lose all your assets, and your biggest asset is your home. Well, this is not necessarily always the case. In fact, if you can actually find someone who will buy your beneficial interest in your home then you get to keep your home. Surprisingly, it could only cost them perhaps one pound. So what you need to do is seek professional advice if you're in this kind of position.

Will I lose my car if I am declared bankrupt?

So if you've got a car like a Ferrari or a porche you're probably going to lose it in bankruptcy. However you may be able to keep the car if you can show you need it in order to do the job that you do but one of the things that you must be aware of is that if it is a high value car the official receiver have every right to insist that you sell that car and replace it with one of lower value if you desperately need a car for your job. In some situations if the official receiver feels that you don't need a car for the job that you do then they can actually claim your car and sell it for scrap.

Will I be able to keep anything I own if I go bankrupt?

The official receiver has the right to take anything that you own and sell it, using that money to pay your creditors. However in reality, we've never known an official receiver to go around to someone's house and take inventory of all their goods, and then sell those goods off. Typically, the official receiver is not interested in the daily items. They're interested in larger assets. So, they're looking for houses, cars, jewellery, or any kind of investments, like shares, endowment policies or bonds. If you don't have those kinds of assets, then you file. If you do, you will declare them, and the official receiver will decide how best to deal with them.

Will my partner or spouse have to declare bankruptcy too?

The courts, not the official receiver, are interested in your partners financial affairs, if they aren't declaring themselves bankrupt.

Am I restricted to living in the UK after declaring bankruptcy?

There's nothing to say that you have to live in the UK once you've declared yourself bankrupt. However, while you're in that undischarge period, so that first year of bankruptcy, you must comply with all of the official receivers requests, and one of them will be to let them know where you're living.

Can I transfer my assets to someone else prior to going bankrupt?

On the bankruptcy documentation, you will be expected to declare any assets that you have transferred to someone else below the market value. If that is the case, the official receiver is likely to investigate matters. For example, if you have sold something to someone else but you have sold it very, very cheap, below its real value, the Official Receiver will investigate that and can actually seek for those goods to be returned to the Official Receiver, who is now the trustee of your estate in bankruptcy.

What happens to any inheritance I've received before bankruptcy?

If you've inherited money before you've declared bankruptcy, the Official Receiver may well ask questions about how you've spent that money and why you didn't use it in order to pay off your creditors. Remember, the Official Receiver has the right to inquire into your financial affairs for the period of your bankruptcy and for the period prior to your bankruptcy

What happens to any inheritance I receive while I am in my bankruptcy?

Once you are bankrupt, if you receive any inheritance, it doesn't belong to you. It belongs to your trustee in bankruptcy, the Official Receiver. The Official Receiver will use it for the benefit of your creditors. If you think you are likely to inherit money in bankruptcy, then it is best to seek professional advice as things can be done about it.

Will I be forced to take my children out of private school if I go bankrupt?

If your children are privately educated and you decide to go bankrupt, the courts won't force you to remove your children from that school. However, private school fees aren't deemed to be essential expenditure during bankruptcy proceedings. Should your child be in the final year of important examinations, it's likely that those school fees will be allowable expenditure. However, it is a conversation that you need to have with your trustee of bankruptcy, the Official Receiver, and you need to know what kind of parameters you can use for that negotiation. Professional advice in this case would be useful and beneficial.

Will going bankrupt affect any investment I have in property overseas?

Your bankruptcy covers your worldwide estate. Therefore, when you go bankrupt, you must declare any assets that you have anywhere in the world. Once you've gone bankrupt then your trustee in bankruptcy has full control over these assets. That is the Official Receiver.

What happens to all my credit cards if I am declared bankrupt?

If you're going ahead with bankruptcy, the likelihood is that all your credit cards have debt on them. All of those credit cards were declared in your bankruptcy documentation. You should have stopped using them; those credit cards will no longer be valid.

What happens to my bank account if I am declared bankrupt?

If your bank account is overdrawn, it will go into bankruptcy. Of course you will no longer have that overdraft, but you will also no longer have that bank account. If you have a bank account that has savings in it, the Official Receiver will freeze that bank account and seek to extract that money for the benefit of your creditors. However, it doesn't mean that you're not allowed to have a bank account. Every person in the UK, by the government's ruling, is entitled to have a bank account. Usually, what you'll be offered after bankruptcy is a basic cash account, which allows you the general and normal functions of a bank account, but it won't give you a chequebook and it won't give you an overdraft facility. However, you can have your money paid into your bank account; you can have a standing orders, direct debits and the ability to access your money anytime you want to.

What happens to my pension if I am declared bankrupt?

The issues around pensions in bankruptcy are rather complicated. What you need to do is to seek specialist advice in order to understand how your pension may or may not be affected by your bankruptcy.