The idea of bankruptcy carries a certain stigma. And that perception keeps many people from filing even if they need to. But a rule change last April, and a notable cost cut, is altering the face of bankruptcy. Now, online bankruptcy filings are an option.
Before, all bankruptcy filings required a court appearance. Now, you can complete the process from the comfort of your own home.
The rate of bankruptcy filings by individuals increased 7 percent during the third quarter of 2016 when compared to the previous year. Whether that is directly a result of the new process, a sign of the times, or a combination of the two, is not fully determined. However, both factors might be relevant.
The number of creditors applying to make someone bankrupt has actually decreased. This means the total number of bankruptcy in England and Wales actually declined by 1.5 percent.
When debt becomes overwhelming, bankruptcy can provide a reprieve. However, it does put all of your assets at risk, and the process can take one year. Often, personal assets are used to at least partially repay creditors, but certain properties may be exempt. As reported by the BBC, after the process change in April, interested parties can file online for £680.
It is important to note that bankruptcy isn’t the only option for managing debt. There are alternatives to consider.
Individual Voluntary Arrangement
An individual voluntary arrangement (IVA) creates a deal between the borrower and creditors. The deal is overseen by an insolvency practitioner. An IVA lowers the risk to certain assets, like your home, but often requires certain debts be paid in one payment.
The use of IVAs was up 29 percent when compared year-on-year.
Debt Relief Orders
Debt relief orders were first introduced in 2009. As of October 2015, individuals with debts less than £20,000 can use the process to write off certain debts. These orders better protect your assets and involve less than traditional bankruptcy.
After reviewing all methods of declaring insolvency, 24,251 individuals became insolvent during the third quarter of 2016. That means that one in every 515 adults in England and Wales became insolvent between September 2015 and September 2016. That shows an increase of 6 percent over the previous quarter and an increase of 19.3 percent when compared to the third quarter of 2015.
Concerns for the Future
With the economic uncertainty of the current times, including rising prices and in the amount of consumer debt, concerns for those struggling may only increase. Using credit to make ends meet, the paradigm is often unsustainable over the long-term.
It is important to know that those struggling financially do have options. Situations are more manageable with the proper assistance, and programs may exist to help. Before resorting to additional debt, check into all of your potential options. And, if you are currently carrying debt, do what you can to pay if off and avoid creating any more. This is easier said than done, there is no harm in trying to get your financial house in order.