The quick answer
When you go bankrupt your assets pass (or vest as it is called) to a Trustee in Bankruptcy. Usually, a year later your bankruptcy will end (called being discharged). You are then free to go on with your life, however, you may still have a trustee in place, especially if they have not been able to realise and sell your assets.
There are lots of myths about bankruptcy and every amateur has an opinion about what happens. In most cases, the myths can appear scary and do nothing to reassure you.
Usually, it is not as bad as it seems and bankruptcy can be a good and relatively painless option. However, if you own a home, a business, or are a director of a company, then your situation will be more complicated.
In more detail
The Usual Downsides To Bankruptcy Are
- If there is equity in your home, it will have to be sold to realise the equity (although it can be bought by a family member).
- You will lose other assets such as savings, high value cars, buy to let properties, shares in a company etc.
- You may have to pay an amount of your surplus income for three years.
- You cannot be a director.
- It affects your credit rating for six years.
The Upsides Are
- It clears your unsecured debts such as credit cards and loans.
- Bailiffs have to now leave you alone.
- It can be a great stress reliever.
- If you do not own a house and only rent then you should not lose your home.
A Word Of Advice
It is very important to take proper professional advice before making yourself bankrupt or being made bankrupt (if you can afford it) just to understand what the effect will be and get answers to the questions you have.