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It all came to a head October 2001. My latest child had just turned 1 and my husband had a business that unfortunately had gone wrong. We were borrowing credit left, right and centre and were getting deeper and deeper into debt, the only solution was bankruptcy.
Bankruptcy has to be the last solution as its a big step to take and lasts for 3 years.
The funny side of it is that you have to have money to make yourself bankrupt. At the time the price was £150 per person to declare yourself bankrupt. My husband and I went along to our local County Court and asked for all the forms etc.
The forms are like a book, you have to list EVERYTHING that you have had money wise from as far back as when you first opened your first bank account. Nothing is left out. You have to list all debts, store cards, overdrafts, loans, mortgages etc.
You then make an appointment to lodge your application with the County Court and you are put before a District Judge who will "declare you bankrupt". He will ask you to make sure that want to go bankrupt and will issue you with your bankruptcy petition duly sealed and stamped. Once this had been done you are officially bankrupt. But that's not the end. The Court will then make you an appointment to see the local Official Receiver who will be in charge of all your debts, this is a whole day thing again they go over everything you've ever had or owned money wise.
Everything is then added up and assessed against any wages coming in, rent going out expenses etc. and will see if there is anything left over which can be paid to creditors, if so it will be, if not you are told and you are then bankrupt for 3 years (ours finally ends this October!!!). The other downside is that it has to be advertised (by law) in the local paper and the London Gazette.
During the time that you are bankrupt you are not allowed to have credit as such. You are allowed to have some credit up to the value of £250. You are not allowed to take our Hire Purchase agreements and your credit reference will be zilch!
After the 3 years is up you will automatically get discharge papers from the Court. When applying for say a mortgage after this time you have to declare that you are a discharged bankrupt as there are specialist mortgages around. You can apply for credit but again you have to stress that you are a discharged bankrupt.
I have to admit it was the best thing that we ever did. Before we did it I was afraid to come down in the morning to see what post there was, this gave us a fresh start and we've never looked back. In the three years of the bankruptcy its given us a chance to save. I will never own a credit card or have a cheque book again, its taught us the value of money as well.