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The life of a bankrupt may not, necessarily, be unbearable. Indeed a bankruptcy order can free an individual from his or her overwhelming debts and allow him or her to make a fresh start financially. However, bankruptcy not only places your assets - possibly including your home -and your money in the hands of the Official Receiver, but may result in a loss of esteem from your family, friends and others, who consider the whole idea of bankruptcy as unethical. Furthermore, if bankruptcy is found to be the result of your own dishonesty, or recklessness, you may be subject to restrictions that remain in place for up to 15 years.
One slight advantage of bankruptcy is that you are required by law to supply details of all your financial dealings to an independent person - the Official Receiver or an appointed trustee such as an insolvency practitioner - who makes an assessment of the best way to proceed depending on your level of indebtedness, etc.. This places not only the decision - making process, but also the administration and payment, or your debts in the hands of a responsible third party. This service is, of course, not free of charge; legal fees, etc. are payable, and a levy of 15% is payable on all sums received by the Official Receiver or trustee.
Your finances will, no doubt, be reorganised - your personal assets will be sold off to pay debts, for example - but if debts have accrued as a result of wanton, rather than necessary, spending, you may need to adopt a more prudent approach in the future. Once you are declared bankrupt, your bank accounts and credit card accounts will be closed, which can actually be a help in this respect. Even if your bankruptcy is not directly attributable to your actions - it may be the result of unemployment, illness or accident, for example - you will need to rebuild your credit rating slowly over a period of years. If you are declaring bankruptcy for the first time, you will automatically be freed or "discharged" from bankruptcy after a period of one year. Once you have been discharged most debts are "written off" and cannot be pursued by creditors, but details of your bankruptcy remain on your credit file for a period of six years.
This means that establishing a good credit record during, and after, the bankruptcy period is difficult but not impossible. You may, for example, be able to obtain a prepaid, or deposit, credit card from a bank or other financial institution; this basically involves an account into which you deposit funds and obtain a credit card up to the limit of those funds. You obviously cannot exceed the limit of such a credit card, and effectively regular payments can help your credit rating to improve by demonstrating your ability to manage credit responsibly. You may find that after a year or two, your credit rating may have improved sufficiently for you to apply for a mortgage loan, at a reasonably competitive rate, for example.
