. :~ ALIVE FUN ARTICALS ~: .
Over the course of the past twelve months or so, since the start of the credit crunch, many people have been struggling to keep up with their regular repayments on their mortgages, personal loans and other debts such as credit cards, leading to the inevitable situation of building up a large amount of arrears on their loans, receiving letters from their creditors demanding money or threatening court action and in extreme cases looking at the distinct possibility of having their home repossessed.
As the UK economy continues to slow down even further, the prospect of a recession and increasing levels of unemployment seem ever more likely and this is only going to make matters worse for those individuals who may already be struggling to keep up with their finances.
Many people who find themselves in the situation of having spiralling debts, without being able to see any way out of the problem, believe that they have no alternative but to file for bankruptcy to escape their predicament, without being aware of the full implications of their actions, both immediately and in the future, or what other steps they may be able to take to avoid this very public and humiliating admission of financial failure.
There are, of course, both positive as well as negative aspects to a person declaring themselves bankrupt and in some cases there could be no alternative, or bankruptcy may be the best course of action if a person’s level of debt is so extreme that they realistically have no prospect of repaying the amount they owe.
Declaring oneself bankrupt is an extreme measure and should be considered only as a last resort as a solution to the problem. In this article, we try to look at both the beneficial as well as detrimental aspects of bankruptcy and what alternatives may be available to an individual who may be considering this route.
On the positive side of the argument, once an individual has filed a petition for bankruptcy with the court dealing with their case, they will no longer receive the regular bundles of post from loan companies and other creditors demanding payments, as they are not allowed by law to contact the person directly once they have filed with the court, all correspondence must be handled by the administrator who will be appointed by the court.
Furthermore, creditors will be unable to proceed with any foreclosures or repossession proceedings until the full court process has been completed. So this can relieve a lot of the stress and worry which being unable to repay debts can often cause and can at least ease some of the pressure in the short term.
It may also be possible, in some cases, for an individual to retain some of their possessions, such as their house or car, even though they have been declared bankrupt and even though the person in question will be declared bankrupt for a period of three years, with the bankruptcy showing up on their credit file for a considerable period of time beyond the date they become discharged, it is possible for the individual to start repairing their credit rating straight away, by handling their ongoing finances in a responsible manner.
A bankruptcy order can also “clean the slate” with personal loan and credit card companies etc, as most creditors will accept significantly less than the total balance of the outstanding loan, as full and final settlement of the debt. The view of the lender is that they are better off getting paid some of the debt now, rather than none of it at a later date! Once a creditor has accepted a settlement figure and this amount has been repaid, the loan is considered cleared and the lender is unable to chase the borrower for any more money in the future.
On the negative side of the argument, when a person is declared bankrupt, their name is published in the local newspaper and a public record of the event is retained by the court. They will also be excluded from certain occupations or jobs, such as those working in public office, or those in the financial sector such as banking. For those who own a business, this must be closed down, with the inevitable consequences for any employees.
Not all debts are necessarily cleared through bankruptcy, student loans, for example, would not be cleared and this debt would still remain outstanding after the bankruptcy ended.
Once a person has been declared bankrupt, they will find it practically impossible to obtain any type of credit through usual methods such as mortgages, credit cards and personal unsecured loans.
Even once they have been discharged from their bankruptcy, it will still show up on their credit file for several years and the majority of lenders will be extremely reluctant to offer any type of loan or other credit and even if they do, the high level of interest charged is likely to make the loan prohibitive to the borrower. If an individual has managed to retain ownership of their own home, it may be possible to be accepted for a secured loan on the property, but once again, the lender would charge interest at a rate which reflected the previous financial difficulties and also only offer a low loan to value ratio.
So what alternatives exist for someone who may be considering bankruptcy? As soon as a person realises that they are in financial difficulty, they should contact their various creditors to see what help they can offer. In many cases, a solution can be agreed with the lender which benefits all those concerned and stops the problem becoming any worse. This can include measures such as paying interest only for a period of time, or rescheduling the loan in order to reduce the monthly repayments and make the debt more manageable.
Help and advice is available from a number of sources; the Citizens Advice Bureau (CAB), Financial Advisers, debt management companies and insolvency practitioners can all provide valuable assistance and advice for those in need. For a person with loans and debts with a number of different creditors, an Individual Voluntary Arrangement (IVA) could be taken out with a debt management company, which could reduce the level of monthly repayments required and is one step short of bankruptcy.
As we have mentioned previously in this article, whilst bankruptcy can be beneficial in many cases and in some cases, the only possible solution to a person’s financial problems, it is an extreme measure and should only really be considered as a last resort, once all the other possible avenues have been explored and exhausted.
The implications and repercussions of bankruptcy can be devastating and long lasting for an individual and a person in this desperate situation should contact their creditors and take advice at the first sign of financial difficulty in order to avoid this route.
============================ The End =========================
0 comments:
Post a Comment