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Can I Go Bankrupt If I Am Unemployed?

April 25, 2012 | Comments: 0 | Views: 214

We ask whether you are still allowed to declare yourself bankrupt if you are unemployed.

Whether or not you are employed or unemployed makes no difference to whether you are eligible to declare yourself bankrupt.

The key criterion for bankruptcy is that you are insolvent and unable to repay your debt. If this is the case then you can declare yourself bankrupt whether you are employed or not.

If you are unemployed this will generally mean that you will have a low income and may not be able to make any payments towards your creditors. Where this is the case bankruptcy may actually be an ideal solution for you.

You pay nothing in bankruptcy if you cannot afford to pay

Unlike the other forms of debt management solution, you do not have to be employed or have another form of sustainable income to declare yourself bankrupt.

If once you are declared bankrupt you cannot afford to make any payments towards your debts then you do not to do so.

In bankruptcy whether or not you will have to make any payments will depend on the amount of disposable income you have, disposable income being the difference between your income and your reasonable monthly expenditure.

For this reason when you complete your bankruptcy application forms, it is very important to provide accurate living expenses so that you do not give a false impression of your available disposable income. More information about this can be found in the bankruptcy living expenses guide.

Paying the court fee

Although being unemployed will often mean that you have a low income, you will still have to pay the court to declare yourself bankrupt.

The standard fees associated with bankruptcy are currently £700. If your gross annual income is below £13,000 (as a single person) or £18,000 (if you are couple) you may qualify for part of these fees (the Court Fee) to be waived. This would reduce the cost of the bankruptcy to £525.

Clearly these fees are still significant if you are on a low income and you may have to save up for a number of months before you can afford to pay them or alternatively borrow them from a friend, family member.

If your debts are less than £15,000 and you are not a homeowner, you may be eligible for a Debt Relief Order (DRO) which is the formal alternative to bankruptcy for people on low incomes.

What happens if I get a job while bankrupt?

If you get a new job while you are bankrupt you must tell the official receiver. They will then send you a new income and expenditure budget to complete and return to them.

If your new job means that your income has increased, you now have disposable income after all your reasonable living expenses are paid for.

It will therefore be likely that the official receiver will ask you to start making monthly payments towards your debts in the form of an Income Payment Agreement (IPA).

If you are asked to start paying an income payment agreement, this will then last for 3 years from the date it is issued. This means that the IPA will normally continue even after you have been discharged from your bankruptcy.

Bankruptcy is the ideal solution if you are unemployed?

Bankruptcy is not suitable for everyone. However if you are unemployed and have a low income Bankruptcy might be the ideal answer to your debt problem.

This is because once you are bankrupt you will not be required to make any payments towards the debts included in your bankruptcy if you cannot afford to do so.

However there are other implications of bankruptcy particularly if you are a home owner which may still mean that bankruptcy is not suitable for you.

As such before making the decision to declare yourself bankrupt, you should make sure that you consider all of your options and take expert advice.

What to do next

If you are struggling with debt and are considering bankruptcy, have a look at the useful information about Bankruptcy on the BeatMyDebt.com website.

Our experts are available to speak to you about the bankruptcy option and offer further help and advice.

Our vibrant online debt forum gives free access to experienced industry experts and others who have suffered with debt problems and have been through the bankruptcy process themselves.

Useful guides and more information is also available designed to help you understand how to manage and resolve debt problems.

James Falla is an expert debt advisor from BeatMyDebt.com. For more quality and confidential information on Bankruptcy, visit http://www.beatmydebt.com/bankruptcy/index.htm

Source: EzineArticles
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