Has the stigma of bankruptcy been reduced and are the personal and business handicaps associated with becoming a bankrupt lessened?
“When high-profile individuals like Kerry Katona, Joe Swash, and Martine McCutcheon are made bankrupt, it appears to many that the stigma attached to bankruptcy has declined, and people can simply wipe out their debt through bankruptcy,” says Natasha Biggs, a solicitor with law firm Furley Page.
“When celebrities who appear to have been reckless with their spending appear free of the debt 12 months later, the perception of bankruptcy is tainted. But debtors can find themselves in difficulties for lots of reasons, not just living a luxury lifestyle. Loss of a job, illness and divorce can all leave people unable to pay their debts,” says Natasha, who is a member of the insolvency and debt recovery team based at Furley Page’s offices in Chatham Historic Dockyard.
Natasha said that despite public perception, bankruptcy is on the decline in the UK. This is mostly due to the increased use of other debt management options such as Individual Voluntary Arrangements, Debt Relief Orders and debt management plans rather than a change in spending and falling debt accumulation by individuals.
“Bankruptcy can have far-reaching implications and may not live up to the public perception of an easy escape route from debt. Along with restrictions on holding directorships, you may also be barred from holding other jobs or public offices, while some employment contracts allow employers to dismiss bankrupt employees.
“Those renting properties may find that their tenancy agreements do not allow a bankrupt individual to live there and they may have to seek alternative accommodation. The assets belonging to a bankrupt will be carefully considered and may be sold to discharge part of the debt, even jointly held assets such as the family home can be sold.
“You will be unable to obtain credit without disclosing your bankrupt status and it’s increasingly difficult to open a simple bank account as a discharged bankrupt. Your details will also be placed on the Insolvency Register, which is a publically accessible record and your credit record will be adversely effected for at least six years.”
Natasha says that while bankruptcy is usually discharged after a maximum of 12 months, you could be asked to pay any disposable income into an Income Payment Arrangement for three years before you are discharged.
“It goes without saying that when considering bankruptcy, it is important that legal advice is sought early, and all alternatives considered,” she adds.
For further information about bankruptcy and other debt management options, contact Natasha Biggs at firstname.lastname@example.org, call 01634 828277.
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