Some basic facts about Bankruptcy

There are many myths and legends about Bankruptcy. In order to clear up some common misunderstandings, we decided to write explain some of the facts on bankruptcy.

Insolvency in the United Kingdom is on the increase. In the year 1997, there were almost twenty thousand bankruptcies filed. If you think this a lot, the figure had reached fifty thousand per year by 2005. The reason for this is the Enterprise Act of 2002 that makes bankruptcy simpler.

Rather than the old style debtors' laws of being locked up or locked into five years of financial limbo, the entire system has now been streamlined and now those who become bankrupt are rebuilding their lives from the moment the bankruptcy is declared and free from it within two years. A very positive way to look at bankruptcy and the reason why many people are choosing it as a way of climbing out of the pit of debt that so many find themselves in.

There are some negatives though. You are legally obliged during the time of your bankruptcy to inform those who lend you more than five hundred pounds that you are bankrupt. This is enough to frighten even the most risk taking financial institutions, but it also means that legally, you would have to tell a friend or family member if they lent you more than five hundred pounds. Certain professions will not allow a bankrupt to work for them, certain high ranking positions of power, or those who deal with financial management would be made redundant from their position, possibly in breach of their contract.

For the period that you are bankrupt, you cannot be the director of a limited company. You can always remain a sole trader and as your business is probably the only way you will stay afloat, you will be allowed to keep trading, as long as you have not broken the law.