Disadvantages of bankruptcy
Bankruptcy may provide a solution to your immediate debt problems but keep in mind that there are some restrictions that come in force once you are declared bankrupt.
- You cannot emigrate to another country to salvage your financial difficulties. No government allows any registered/declared bankrupt to immigrate to its country.
- You will need to advertise your status in the local press and the London Gazette, which is the main source of information for major credit rating agencies. Besides, you will also have to inform about your bankruptcy to your landlord, building society and creditors.
- You will be required to fill in numerous forms and have a meeting with the Official Receiver after which a Trustee will investigate your affairs.
- If you are running a business it will be immediately closed and your employees dismissed.
- You also stand to lose any asset including your home, life insurance etc. Then again, you will also lose any other asset that you acquire during the term of your bankruptcy for example, inheritance and insurance settlements.
- All your bank accounts, credit cards etc will be closed. Anything that you have leased, hired or bought would be returned to the owner.
- Some companies may not allow you work for them. If at all they do, they may not wish to promote you to higher and critical positions where trust is needed.
- You may be ordered to appear in a court to be publicly examined over your debts and how you incurred them. It can be a bit awkward to explain to everyone how you became bankrupt.
- During the period of bankruptcy you are not permitted to start any business under a new name. You will have to retain your old name that is associated with your bankruptcy.
- You cannot be appointed as a director of a public limited company or promote it. You cannot hold any public office such as a member of the local authority or of parliament.
- Your credit ratings are put on low at least for a period of six years.
- You cannot apply for a loan of more than £500 without revealing to your lender that you have been declared bankrupt. If at all you are considered for a loan, you have to pay a heavy price in terms of high rates of interest and other charges.