This is a guest article by Mark Davis from PiggyBankrupt.co.uk
Many people associate going bankrupt with financial loss only. Often approaching bankruptcy with this mind set can worsen its social consequences. This article explores some of the effects that bankruptcy can have on the whole family.
Making the decision to go bankrupt can be the role of an individual or the family as a whole. The way in which the decision to go bankrupt is arrived at can often affect family relations significantly. For example, going home one day and explaining that you have gone bankrupt with the risk of losing your house probably will not be taken very well. It is therefore important to consider planning a bankruptcy with the family.
The stress and anxiety placed upon the family during bankruptcy does not start the day an individual goes to court. Years before this the family may have been struggling. It is important to understand this to avoid blame during the bankruptcy.
Uncertainty can be introduced into family life, particularly if professional advice is not sought. Whilst it is easy to understand how to go bankrupt, it is not so easy to understand how the bankruptcy law will be applied to your particular circumstances. This uncertainty can cause problems.
Although the stigma of bankruptcy has reduced in recent years, it is still seen as a drastic step. Bankruptcy is serious and this can frighten some individuals, often leading to uncharacteristic behaviour which can lead to stressful environment.
Role reversal is often one overlooked consequence. This phrase is often used to describe the process of the “bread winner” role transferring from one partner in a relationship to another. The reason this can have an effect on a family is due to the gaining and loss of responsibilities felt by each partner in their new roles.
Bankruptcy is known as a public affair as there is a record of the bankruptcy available to the public. The bankruptcy is also advertised in the London Gazette and it may be advertised in a local paper at the discretion of the Official Receiver. This is a problem for some people or families.
A major topic in bankruptcy is the matrimonial home. If you decide to go bankrupt then the house is at risk. This is one very good reason to obtain professional advice. Dealing with your house in bankruptcy can be complicated and there steps that can be taken to ease the burden and reduce the stress.
When a bankruptcy order is made you will lose control of any assets that you own. As a result you may have to give up possession of some of those assets. This will not usually include household items. It will only include items of a significant value. A car is one such asset.
Bank accounts, often held jointly, will also be looked at in bankruptcy. Although the trustee will only be interested in the bankrupt’s share, the amount of this share can often be a matter of opinion. Obtaining a joint account after bankruptcy can obviously be a sticking point with one person being bankrupt.
Unfortunately bankruptcy is not entirely a fresh start. If an individual has a disposable income then they will be expected to hand that over to the trustee for a period of three years. This can prolong financial hardship.
When an individual has to go bankrupt their credit worthiness will be affected for many years to come. This will impede on their ability to obtain credit. This does not just mean obtaining a loan. It also includes obtaining a mortgage, mobile and other bills for service on credit that may be affected. Transactions that have taken place prior to bankruptcy, for example repaying a family member, may be investigated. As a result of the investigation the family member may be asked to pay over the money to the trustee.
Having an understanding of all the factors likely to affect you during bankruptcy is important. It will enable you to communicate with your family, hence reducing the stress and uncertainty. This is where obtaining professional advice with bankruptcy can benefit hugely. It will aid in reducing the social consequences of bankruptcy.