The first ‘golden rule’

The first golden rule if you've got debt problems

The first golden rule is:

‘People who are really struggling with debt should first look at personal bankruptcy because it’s almost always the best option’.


But this is the opposite of what you’d expect! And it’s not what most debt advisers will tell you.


Why do we say this?

  • In three quarters of cases all you lose is your unsecured debts: you lose no assets, not even your home
  • It costs just £700 to go bankrupt, far less than almost all of the other solutions you may have available
  • You’re in bankruptcy for just twelve months – it will pass very quickly indeed.  You may even be discharged earlier.  How long have you been juggling your finances?  IVAs are typically for 5 years – can you see forward this long?
  • Often it’s far less risky a solution than others for dealing with your debts.  You can learn how the process works, and can accurately anticipate the outcome because there are far fewer areas for compromise or negotiation than other solutions
  • There are no messy negotiations with your creditors – if you petition yourself, your bankruptcy is simply imposed on them
  • In just one quarter of cases – Insolvency Service figures, not ours, click here and read section 3 – the Official Receiver takes a share of your surplus income, but then for just 3 years.  Compare this with a typical IVA – 100% of cases, 5 years.  But, and it’s very important you note this, in a bankruptcy no one can make you work as hard or do as long hours as you did before.  Take time out to re-assess where you want to take your life, you can.  You can take a lower paid job that’s less stressful or work fewer hours.  The key point is that it’s often possible to reduce your income for the year of your bankruptcy – and once you’re discharged, it’s too late for the Official Receiver to seek any money from you, from there on in you’ll keep all the money you earn for yourself.  One year ‘pain’ for ‘later gain’.  Generally only those who don’t bother learning how ‘income payments’ work in practice end up paying them!
  • If you are lucky enough to enjoy a windfall, say a legacy or a lottery win, you’ll only have to pay it into the bankruptcy if you became entitled to it while you’re bankrupt.  Become entitled after you’ve been discharged and you keep it all!  Compare this with IVAs – 5 years-  and DMPs -unlimited.  I presume you’ve not got a crystal ball?  The point is that your own bankruptcy can be a great way of protecting your family’s wealth!
  • Bankruptcy, unlike IVAs and DMPs, are a catalyst for change – you are likely to live your life differently and ditch any bad habits in a bankruptcy.

Now read the second golden rule, by clicking here.