Should You Consider Bankruptcy ?

When all else fails, there is bankruptcy. Insolvency experts expect 20,000 people to declare themselves bankrupt in the first three months of this year, which will be the highest quarterly figure since records began in the 60s.

For debts of less than £20,000, the procedure is known as a summary administration and the bankrupt may be discharged after two years. A first-time bankrupt owing more than £20,000 may be discharged after three years.

Anyone can go bankrupt, either voluntarily or forced by a creditor owed more than £750. A bankruptcy order can be made even if you refuse to acknowledge or agree to the proceedings, so it is best to co-operate and negotiate. Negotiating after a bankruptcy order is made is difficult and expensive.

On the plus side, bankruptcy provides relative peace of mind - but you lose control of your assets, you cannot obtain credit for more than £250 without disclosing your bankruptcy and you cannot act as a company director or carry on working in most professions. Your credit is also affected for many years after the annulment.

Most assets in a bankruptcy fall under the control of a trustee, who will either be the official receiver (a civil servant and officer of the court), or a licensed insolvency practitioner (often an accountant).

Whoever is appointed becomes responsible for finding out as much as possible about the debtor's assets and liabilities then maximising returns for the creditors, within certain guidelines. They charge for their services and their often huge bills are added to the costs of the bankruptcy.