Wednesday 7th of April 2010
Individuals should not be allowed to enter into bankruptcy as a "knee-jerk reaction", one organisation says, although many Britons may decide an individual voluntary arrangement (IVA) proves to be a better option.
Insolvency trade body R3 explains it can be tempting for people to apply for bankruptcy after a particularly bad day.
The threat of bailiffs and debt collectors could also push debt-riddled consumers into applying for a bankruptcy order.
Rather than face the potentially serious consequences of bankruptcy - such as being unable to work in certain sectors like accountancy and losing a family home - people with unsecured debts of more than £15,000 may decide an IVA is more suitable for their circumstances.
Should IVA answers convince people to go down this route, they should remember that an IVA will still leave a mark on their credit file and it will take around five years for unsecured debts to be cleared.
"Bankruptcy is a serious matter with dramatic consequences. It’s important that people receive proper professional advice before the process begins so they understand what it entails and are aware of the alternative options available to them," president of R3 Peter Sargent says.
By Hayley Jones
