For many, the word ‘bankruptcy’ strikes fear into the heart of their financial world. However, Stephen Gold, a retired judge and seasoned author, offers a different perspective. Through a new four-part guide in ThisIsMoney, Gold details the potentially liberating journey of bankruptcy for those drowning in debt.
Bankruptcy: Not the Social Pariah It Once Was
Gone are the days when declaring bankruptcy meant becoming a social outcast. Stephen Gold reassures that the stigma attached to bankruptcy has significantly diminished. It’s no longer a scarlet letter worn in the community but a viable option to silence the relentless barrage of creditor demands, legal threats, and the dread of bailiffs knocking.
The Road to Bankruptcy: What You Need to Know
Forced vs. Voluntary Bankruptcy
A creditor may push you into bankruptcy if you owe them at least £5,000—a considerable jump from the former £750 threshold. But, some savvy debtors keep their dues just under this limit to avoid such a fate. On the other hand, you can take matters into your own hands and file for bankruptcy yourself, which isn’t hindered by previous financial missteps.
Going Solo on Bankruptcy
The DIY route to bankruptcy is now predominantly an online affair through the Insolvency Service. The hitch? It comes with a £680 fee. While some may try to borrow this amount, Gold suggests paying in instalments if lump sum payment isn’t feasible. Remember, self-filing doesn’t have a £5,000 debt minimum—your debts just need to surpass your assets.
A Cheaper Alternative: Debt Relief Orders
For debts not exceeding £30,000, a debt relief order (DRO) could be the ticket. This ‘second division’ bankruptcy process is a more affordable £90 and involves an intermediary like Citizens Advice. However, your assets must be below £2,000, and you can’t have more than £75 in disposable income each month.
The Bright Side of Bankruptcy
One year into bankruptcy, you could be freed from prior debts, except for obligations like spousal maintenance, fines, child support, and student loans. Additionally, personal pensions usually remain untouched, providing some financial solace.
The Drawbacks of Declaring Bankruptcy
Despite the upsides, bankruptcy can strip you of your possessions, barring essentials necessary for work or basic domestic needs. Plus, there’s the matter of income payment agreements, which may claim a portion of any surplus income for three years post-bankruptcy.
Restrictions and Repercussions
Post-bankruptcy life comes with constraints: you can’t be a company director without court approval or borrow over £500 without disclosing your bankrupt status. These restrictions, usually lasting a year, could extend up to 15 years if you’re found at fault for your financial collapse.
Financial Guidance from a Legal Mind
Stephen Gold isn’t just a judge; he’s an author dedicated to empowering individuals with legal knowledge. His latest book, “The Return of Breaking Law,” ventures beyond bankruptcy to provide a treasure trove of legal tips.
Navigating Court Fees and Financial Aid
While the ‘Help with fees’ scheme can waive some court fees, it’s not applicable to bankruptcy applications. However, impending changes on November 27, 2023, could influence whether it’s beneficial to initiate court claims sooner or later, depending on your financial circumstances.
The scheme’s eligibility thresholds are set to rise, allowing those with lower incomes and modest savings to potentially qualify for fee support.
In Conclusion
Stephen Gold brings a ray of hope for those facing the dark clouds of debt. Bankruptcy might not be the end of the line but a departure toward a more manageable financial future. With careful consideration and possible assistance, it could be the beginning of a debt-free life.