Bankruptcy has some negative connotations floating around it, particularly in the current economic climate where businesses and banks are closing down, losing people their jobs and shutting shops on high streets. However, this is only part of the story. Bankruptcy laws exist so that people who have found their financial situation falling apart can ensure their lives are not ruined by whatever mishaps have befallen them.
Bankruptcy is an option for anybody, and you might be surprised to learn that some famous, well-known and respected individuals have filed for bankruptcy, including Walt Disney and Meat Loaf (who actually filed for bankruptcy twice!). If that’s not enough to convince you that it’s a legitimate option, then read on and find out why bankruptcy may be the best way for you to clear your debts.
The main things you need to bear in mind are that bankruptcy can result in a fresh start for you and also affords legal protection for you and anybody else in your family or business that may be being negatively affected by the debt.
The reason for the system’s existence has its roots in the old system of debt management and collection that used to exist in the UK. You may have heard of debtor’s jails, particularly in stories from the Victorian era. These were places that those who owed money could be locked up, forced to pay for the often squalid conditions that they were provided with. The prisons were corrupt, with jailers accepting bribes and mistreating prisoners. In some cases, once prisoners had paid their debt to whoever put them in jail, they would have accrued debt to the jail itself and so continue to be held for that.
Thankfully, debtors jails were abolished in the UK in 1869 after a campaign which fought to bring recognition to the fact that people who have fallen on hard times should be helped, not treated like criminals, and we have much better systems to govern debt management nowadays. Declaring bankruptcy may result in you needing to sell some assets (and so is an excellent choice for those with large debts and few assets), but in the long run you will find that you are free from having creditors knocking on your door and the debt hanging over your head.
The process does have fees associated with it, so you’ll need access to some capital in order to go ahead with a bankruptcy claim. You also need to have details of your finances and assets, and there will be a procedure through the courts to negotiate terms between you and your creditors. It’s a process which requires time and planning, but the outcome is more than worth the effort that declaring bankruptcy takes.