Will my creditors make me bankrupt?

People who are struggling to pay personal debts are increasingly considering bankruptcy as a solution to their difficulties. But how likely is it that one of your creditors will force you down the bankruptcy route?

Bankruptcy is generally seen by most as something to be avoided at all costs. Simply saying the word bankruptcy is often enough to fill people with anxiety.

One of the reasons for this is if you are a home owner with equity in your property, if you are declared bankrupt it may be sold so the equity can be given to your creditors. The thought of being forced out of your home in this way is enough to put many people off the procedure.

Nevertheless, bankruptcy is becoming increasingly accepted as a solution to resolve serious personal debt problems.

One of the main reasons for this is the number of people with debt who are renting their property. If you rent and declare bankruptcy, your home can not be taken away from you. You can generally keep all of your household goods and after twelve months you will be debt free.

To be forced into bankruptcy is unlikely

There are two ways of becoming bankrupt. You can decide to go through the process yourself or a creditor who is owed more than £750 can apply to the court to force you into bankruptcy.

Even though a creditor could decide to try and make you bankrupt, generally it is unlikely that this will happen. There are a number of reasons for this.

The first issue facing creditors is the amount they would have to pay to apply for someone’s bankruptcy. As an individual you could apply to make yourself bankrupt at the court for £600. However, the costs facing a creditor to force you down this route would be nearer £3000.

The second problem for creditors is that they will have to share any money made available though your bankruptcy with all your unsecured creditors. As such, even if there is money available it is highly unlikely that they will be paid back in full.

Attachment of earnings and charging orders more likely

The associated cost and lack of return will make most creditors think twice before making you bankrupt. It is far more likely that they will apply for a county court judgement (CCJ) against you.

If a CCJ is issued but remains unpaid, this then allows a creditor to take further court against you. They can then apply for an attachment of earnings which would mean payments can be taken directly from your wages.

In addition, if you are a home owner, they can apply for a charging order which would secure the debt against your property.

There are always exceptions to this rule. One is HM Revenue and Customs (HMRC). If you persistently do not pay personal tax which is due, HMRC may well choose to pursue bankruptcy proceedings against you.

If you are self employed and owe money to trade creditors, these people may also consider bankruptcy simply out of spite.

However, given the cost and likely return of making an individual bankrupt, commercial creditors such as banks and credit card companies will normally avoid this process. It is far more likely that these types of creditors will pursue traditional remedies such as a county court judgement and then earnings attachment and or charging order.

If you are struggling with debt, visit www.BeatMyDebt.com

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