Author: Scott Nelson
Scott is the founder of MoneyNerd and a financial services expert with over 10 years’ experience in the industry. Troubled by the lack of moral conscience in the industry, Scott decided to use his insider knowledge to give genuine advice to those struggling financially. He’s recently moved out of London to the rural area of Malvern to pursue this ambition.
When you hear the phrase bankruptcy, then there is a good chance that you will think of it in a scary and negative way. Finding out that someone has been made bankrupt usually carries a lot of stigma, but why is this?
The chances are that the way we see bankruptcy in a negative light is due to how it is portrayed online. Many websites that talk about bankruptcy and even the media when discussing celebrities who have had financial challenges will make it sound scary.
To help to make sure that you only see bankruptcy in a way that it should be seen, we have put together some of the biggest bankruptcy myths that you may regularly hear. Then we are going to bust them.
Busting the biggest bankruptcy myths
There are several myths that people associate with being made bankrupt. Some of them, of course, have some truth or common sense to them, but others are not entirely true.
You have to go to court when you are made bankrupt
This is a common misconception, and it does stem from some truth. You used to have to go to court as a part of the bankruptcy process; however, the entire process moved online in April 2016. So, if you are going to be bankrupt, you don’t have to go to court.
You don’t always get approved for bankruptcy
You do have to apply to go bankrupt, and during this there is an application and decision process that you will go through. However, you shouldn’t worry about whether it is going to be approved or not. Very few bankruptcy applications do not get approved. Of the few that are not approved, it’s often because the applicants are non-UK citizens.
You will have to give up anything that you own to pay off creditors
This is one of the things that scares people the most about being made bankrupt. When some websites say that you have to give up things such as household items and all your clothes, it can be scary. This is not the case. There are belongings that are exempt from a bankruptcy order, that you will get to keep. Exempt items are generally essential belongings such as clothes, bedding, and basic household items like white goods.
You won’t be able to access your bank account
If you have heard this myth, then the chances are that you have already gone into panic mode, wondering how you would ever cope without a bank account. Whilst there is always a chance that your bank account may be closed due to your situation, this doesn’t leave you in the lurch; you can open a basic bank account with several different banks that offer a basic level of banking.
To sum up…
I hope this has helped clarify the reality of bankruptcy for you – it’s not as scary as it seems! Depending on your situation, bankruptcy can sometimes be the best option for you as it allows you to wipe the slate clean.
Of course, you probably won’t want to get into the situation where you do need to go bankrupt, but if you do find yourself in this situation, then don’t panic. It’s a manageable situation and there are people that can help you negotiate it.
One last thing. Before you commit to bankruptcy, don’t forget to assess your other possible solutions. For example, another alternative is to arrange for a DRO, which can also help you rectify any financial problems (it’s been described as ‘bankruptcy lite’!). If you have over £20,000 of debt and don’t own your home, this is a really strong option to consider.