Debt Relief Orders are intended to provide a simple, cheap & quick alternative to Bankruptcy and can be used where

• The debtor is unable to pay his/her debts

• The debtor’s total unsecured liabilities do not exceed £15,000

• The debtor’s total gross assets do not exceed £300

• The debtor’s disposable income, following deduction of normal household expenses, does not exceed £50 per month.

• The debtor is domiciled in England or Wales, or in the last 3 years has been resident or carrying on business in England or Wales.

• The debtor has not previously been subject to a DRO within the last 6 years.

• The debtor is not involved in another formal insolvency procedure at the time of application for a DRO

• For further information on the procedure, implications & pitfalls of a DRO, please see the links section above
  

Although it effectively writes off all your existing unsecured debts, Bankruptcy can have some very serious consequences. Bankruptcy can result in loss of assets, limitations on your future activities, and can affect friends and family. 

Always take proper advice on the advantages and disadvantages of bankruptcy from someone you are sure knows what they are talking about, not from someone you know who’s been through a bankruptcy themselves because their experience will probably be completely different to yours even though your circumstances may appear quite similar.

Having said that, for some people bankruptcy is exactly the right solution. I don’t charge for simple bankruptcy advice and am happy to help with the procedures and forms. I do not misuse the threat of bankruptcy and its consequences to push people towards un-necessary and expensive debt solutions like some providers will.

Bankruptcy deals with unsecured debts (excluding student loans, CSA arrears, and fines). It does not deal with mortgages and other secured borrowings, although it may have an impact on them, and is therefore not a solution to repossession proceedings. This is a separate issue which I can also advise you on.

The single most important reason to avoid bankruptcy if at all possible is where it is likely to impact on your friends and family. This usually occurs where you have made a “preference” or a “transaction at an under-value”.  These are extremely complex issues and I am happy to give specific advice on the telephone, but basically if you dispose of any property, vehicle or asset for less that its true market value, or if you pay any creditor in preference to your other creditors, you will have committed an insolvency offence and the Official Receiver or Trustee will do whatever they can to recover the funds from those who have benefitted. This can include bankruptcy proceedings against those people if they fail to co-operate.

If the Official Receiver believes that he can realise over £3,000 from your bankruptcy,  he will appoint a Trustee  to dispose of your assets, obtain monthly payments from you  and thoroughly investigate your affairs, during which time very substantial costs can build up.

Bankruptcy is also best avoided if possible where debts have arisen as the result of drug-taking or gambling , where money has been borrowed knowing that it could not be repaid, or where fraudulent applications for credit have been made.

If the Official Receiver feels that you are responsible for your own indebtedness or that insolvency offences have been committed, this can result in a Bankruptcy Restriction Order of anything up to 15 years and, in extreme cases, in criminal proceedings.

It does not include normal domestic effects, tools of trade and pensions (bankruptcies after 2000), however property, investments, vehicles, luxury items, valuable items, and any surplus income as defined by the Official Receiver can certainly be at very significant risk.

Any bank accounts you hold will be closed and alternative banking facilities can be very hard to find. 

Your employer may become aware of the bankruptcy through a change in your tax code.

The bankruptcy will remain on your credit file for six years and this can make it difficult, for example, to obtain rented accommodation, or may mean that you have to provide a much larger deposit or guarantees from third parties in order to secure a tenancy agreement.

It is possible to continue trading after a fashion in certain businesses, although clearly if you rely on lines of credit from suppliers, or lease vehicles or premises then trading will almost certainly be impossible.You cannot be a director of any limited company or trade in any name other than your own.

You cannot apply for credit of more that £500 without informing the lender of your bankruptcy.