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Bankruptcy is absolutely a last resort for those whose debts have spiraled out of all control. When repayments cannot be met, when no more expenditure cuts can be made and when other options have been explored an individual can file for bankruptcy. It should never be considered flippantly but once the process has been completed the individual will be rendered debt free.

An Official Receiver is appointed to investigate conduct and financial affairs and all property is controlled by them. The property is then passed to a trustee and is sold for as much as possible. This money is then shared out amongst your creditors. The assets that will be sold are those which have any value; home, life insurance, pension and any assets which are gained during bankruptcy such as inheritances or insurance settlements. Bankruptcy can last up to 12 months and whilst bankrupt credit of over £250 cannot be obtained without a declaration of bankruptcy and you cannot act as a director of a company or take certain positions of public office.

Once discharged from bankruptcy you will be almost entirely debt free and it is an effective means of dealing with an incontrollable amount of debt. However, it should not be treated lightly and there are other less severe means of dealing with debt in some situations, like an IVA or debt management.