How much debt is needed to go Bankrupt
The decision to go Bankrupt will depend on a large number of factors. An important one is how much debt you owe. There are no restrictions or limits on the amount of debt you need to use this solution. You just require unsecured debt of at least £750.
If the amount you owe is high Bankruptcy could be ideal as it can help you become debt free within 12 months. However if you owe a relatively small amount there may be better options.
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What type of Debt can you include in Bankruptcy?
When thinking about how much debt you owe it is important to distinguish between secured and unsecured debts. Secured debts are things like a mortgage, secured loan or car HP agreement. These types of debts cannot be included in Bankruptcy. Only unsecured debts such as credit cards, personal loans, and catalogues can be included.
If you are struggling to pay your mortgage despite the fact that the debt you owe may be many thousands of pounds this solution may not be for you.
Should you go Bankrupt if you owe less than £20,000?
If your unsecured debts are less than £20,000 before you make any decisions about which solution to use you should consider a Debt Relief Order (DRO). This option is available in England, Wales and Northern Ireland. However it is not currently available in Scotland.
The DRO is sometimes referred to as a “light” version of Bankruptcy. This is because it is similar in a number of ways. You are not expected to make any monthly payments towards your debts and they will be written off after 12 months. Having said that one of the major advantages is that it is far cheaper to implement than bankruptcy.
However there are some strict qualification criteria:
- Your unsecured debts must be below £20,000
- You must be renting your home
- Your car must be worth less than £1000
- Your disposable income must be less than £50 a month.
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