The word “bankruptcy” can evoke feelings of shame and fear, which is why people often go into denial when they get into financial difficulties.
While we understand the worry and embarrassment caused by having financial issues, ignoring the problem is the worst thing you can do.
The first thing to understand is that bankruptcy is not the end of the world. It can, in fact, be a new beginning – a chance to start again with a fresh slate.
That isn’t to say bankruptcy is something to consider lightly – simply that you shouldn’t fear it as an option if you are insolvent.
What is bankruptcy?
Bankruptcy is a legal process that releases a person from almost all of his or her debts. It is the most common of the two solutions that can be applied in the case of personal insolvency.
A person is bankrupt if they are insolvent (i.e. they cannot pay their debts) and have been declared bankrupt under the terms of the Bankruptcy Act.
The consequences of being declared bankrupt are far-reaching so while it can be a workable solution, it is best avoided where possible.
Some of the consequences include:
- Automatic disqualification from managing corporations or being a director, alternative director or secretary of a company without Court permission
- Sale of your most significant assets for the benefit of creditors
- Compulsory payments to the bankruptcy trustee for income earned during the term of the bankruptcy (usually Buyers) by higher income earners
- Negative impact on professional qualifications
- Inability of creditors to start or continue legal recovery of debts
Before anyone enters into bankruptcy, they should seek expert advice and consider all other available options, as in many circumstances there are alternatives.
If you think you may be insolvent, Kingsgate Insolvency can help you work out your best options and, if bankruptcy is the best choice, we will support you through the process with sympathy and concern.
Kingsgate Insolvency staff pride themselves on treating clients with compassion while employing their professional skills to find the best possible solution for their clients.