As we steer the good ship “UK Economy” through a bout out fiscal turbulence many experts are expecting to see a major increase in the number of people looking at bankruptcy as an option to escape their financial troubles. But is it really the answer or is there an alternative?

While IVA (individual voluntary arrangements) and Bankruptcy are never the easy choice there are times when it can be difficult to avoid them. Bankruptcy is the one which many people try their best to avoid, the one which still carries something of a stigma. But is it really as bad as they say? Does it impact upon your credit rating forever?

The bankruptcy laws have changed over the last decade and the major problems with bankruptcy many years ago have been reduced. It is not the end of your credit history, it is not the end of the road and it will not see you out on the road with nothing to show for yourself. While it depends how much money you actually owe and whether you can ever see yourself being able to pay it back, a ball part figure from which bankruptcy could be considered would depend on your situation. It could be as little as a few hundred pounds or it could be something well into the thousands of pounds.

Upon taking the bankruptcy route you will be assessed by a Trustee who will be in charge of your case. They will review you situation, what your debts are, lifestyle costs, how much you could afford to pay (if any) and the size of your debt. If you are not in a position to pay they will not push you for payment, although if you have ready assets they have the option of selling some of them off to raise cash. However, there are allowances which will ensure that they will not consider items under a predetermined cut off point. It is not in their best interest to hold you back for years to come – they would much rather draw a line under what you can afford to pay back and advise the courts of this.

Your creditors will be contacted and asked to comment on your case and whether they have any concerns with you pursuing bankruptcy. Unless it was something special they would be highly unlikely to block the bankruptcy hearing if the trustees believed this was the best way forward.

The average bankrupt will be discharged in under 5 years, and while there will still be restrictions to what finance and bank accounts you can open even after you are discharged, these will slowly disappear so long as you get your finances back in order. Bankruptcy is not the easy option, but for more and more people in this day and age it can be the only real option.