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Can you pay anything towards your Debts?
If you can’t afford to make payments towards your debts because you have no surplus income, Bankruptcy could be right for you. A major advantage of the solution is you don’t have to make any further payments if you cannot afford to.
You will need to provide details of your income and expenses during your application. This information will be used to prove whether you have any surplus or not.
If you do have disposable income you will be required to pay this towards your debts for 3 years. However if income subsequently falls the payments stop. So if you lose your job you pay nothing more towards your debts unless you start working again.
If you can make reasonable payments towards your debts bankruptcy may still be a good option. However you should also consider the alternative debt solutions.
Is Bankruptcy right for you if you are a Home Owner?
As a home owner going bankrupt does not mean you automatically have to sell your property. It might still be right for you. However it is important to understand the potential risks.
How your property is affected will depend on the amount of equity in it. If there is very little you should be able to keep it as long as you maintain the mortgage payments.
However if you have a considerable amount of equity Bankruptcy may not be appropriate. The equity would have to be released for the benefit of your creditors which might mean the property has to be sold if the money cannot be raised any other way.
If you are renting you do not need to worry about your home. Your landlord will not be told and you can remain in the property as long as you keep up your rent payments.
Can you keep your car?
You are allowed to have a car if you go bankrupt. However there are strict rules on how much it can be worth. Generally speaking the second hand value can’t be more than £1000.
Where your car is worth more you will have to sell it and buy one for £1000 or less. Any funds left over from the sale have to be given to the Official Receiver. Selling the vehicle before you go bankrupt is an option. You can then use any excess fund to pay your bankruptcy application fee.
If you have a car on finance you will often be able to keep it as long as the outstanding finance is more than the car is worth (and you can afford to maintain the monthly payments). However you will have to check with the finance company that they are happy to carry on with the agreement.
If you are self employed your vehicle may be a tool of your trade (such as your works van or where you are a taxi driver). If so you will normally be able to keep it even if it is worth more than £1000.