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It’s important that you know thy enemy. If you don’t, you might fall for some of the oldest con tricks in the book.
Bankruptcy, much like other processes, has many myths that surround it. There are many urban legends that either entice people or scare them off.
Here are a few of the more common bankruptcy myths.
Myth 1: Filing for bankruptcy is complex
Not true. It is generally a simple process that only appears complex from the outside. You could do everything yourself or you could ask a firm to do it on your behalf.
Myth 2: You will lose everything.
You do not lose everything but you could lose most or all of your assets. The only items the official receiver may not touch, are things you need for your work – tools or vehicles – and household items that you and your family need such as clothing, bedding and furniture.
Myth 3: You will never get credit again.
You will get credit again – from subprime lenders. These lenders often charge ridiculous interest rates and extend their marketing practices to people who have been discharged from bankruptcy. Your credit takes about 6 years to recover from a bankruptcy and you should find it much easier to get credit after this period.
Myth 4: Companies in the UK can go bankrupt
Only individuals can go bankrupt; companies go insolvent, are wound up, go into administration, into administrative receivership, and into liquidation.
Myth 5: You can only file for bankruptcy once.
You can file for bankruptcy more than once but the insolvency office keeps a record of how many bankruptcies people file.
Myth 6: Everyone will know you had filed for bankruptcy.
The only people who will know you had filed for bankruptcy are your creditors and the insolvency office; nearly everyone else will be oblivious to your financial status. However, the insolvency service does publish details about insolvencies on their website. This information stays on the site until three months after your discharge.
Myth 7: You will go to prison
No-one can imprison a debtor; they can only be imprisoned for fraud. Other types of offenses include fines from the magistrates' court; your Council Tax or business rates: or maintenance for your spouse or children. Criminal bankruptcy is a possibility but the probability of anyone going to prison for this is minimal.
Myth 8: You cannot travel abroad
You may travel to any destination you want. There are no restrictions on travelling.
Myth 9: Bankruptcy is free
It does cost money to file for bankruptcy. You’ll have to pay the court costs as well as the official receiver’s fee.
Myth 10: You keep any inheritances and prize winning money
This is false. You need to inform your trustees whenever you had received assets after your bankruptcy. Your trustee then claims the money you had received and pays your creditors' costs.
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