‘Bankruptcy’ is a term that many people dread, often because it is seen as the end of the line. As such, it is important to understand how bankruptcy works in the first place. One must file for bankruptcy on the website of the government, pay a fee, following which a trustee is appointed to control the assets, so as to pay as much to creditors as possible. Bankruptcy order is usually completed in 12 months, barring a few exceptions. In this post, we will talk about a few bankruptcy myths that must be debunked.
- One has to give up everything
Yes, the bankruptcy trustee will take over your assets and the accounts will be sealed, but anything that’s required for your business is yours. In short, if you don’t have a car to go to work or the tools of the trade are taken away from you, there is no way you can earn and repay creditors. Basic things that your family will need like personal belongings and beddings will not be taken.
- It is possible to hide assets
If you have assets, you have to be as fair and honest as possible with the bankruptcy trustee. Keep in mind that you cannot technically ‘hide’ assets, and even if you go, the consequences can be bad to say the least. The role of the trustee is to offer an apt debt management plan, and therefore, disclosing all information is more than necessary.
- Creditors cannot force one to go bankrupt
Well, that’s a myth too, and not in a nice way. If you owe more than £5,000, creditors can choose to petition for your bankruptcy. In most cases, creditors first send a demand for payment called ‘statutory demand’, which will be then followed up the petition for bankruptcy. Do not ignore the ‘statutory demand’ or the petition and take professional advice without delay.
- The world will know
Yes, notices of the bankruptcy petition along with the relevant information and your details will be placed in The Gazette and publicly on Insolvency Register, but that’s intended for the creditors and not a means to shame you. Unless you are a celeb, others may not know beyond financial institutions, and your trustee should be able to guide on debt management.
- One cannot work anymore
Another big myth is bankruptcy prevents one from working. If you don’t work, how are you supposed to repay your creditors in the first place? You can work and earn money, but there are certain exceptions, mainly for the directors of companies. Yes, you may have trouble getting credit and other things, for which taking insolvency advice before filing for bankruptcy is a good idea.
If you want to know more on how bankruptcy works and how it can affect your life and career, consider talking to business rescue experts. Knowing the options and managing debts the right way is the best way to deal with the situation, especially when the debts are beyond control.