Advantages:
One of the primary advantages of declaring bankruptcy is that it stops pressures for all outstanding debt and draws a line under the uncertainty.
Another key advantage is the protection from further legal action. When someone is in debt, they have a legal obligation to repay what they owe. However, declaring bankruptcy wipes out this responsibility, freeing the individual from further legal claims related to the debt.
Additionally, bankruptcy prevents creditors from contacting the debtor. Once the debt is cleared, creditors have no reason to reach out, except in cases involving certain debts, such as student loans, rent arrears, or child support arrears.
Disadvantages:
One disadvantage of filing for bankruptcy is that it will remain on the individual’s credit report for 6 years. This will make it harder for them to acquire loans within those six years, and on top of this the fees and interest rates will be considerably higher compared to before you filed for bankruptcy. Since bankruptcy cannot be removed from the credit report, it will negatively affect the individual’s credit score, unless an annulment can be achieved.
Another disadvantage is the potential loss of the individual’s home. If the property has equity (meaning the mortgage balance is less than the property’s market value), the Official Receiver/Trustee may use the bankrupt’s share of the property to realise this asset and help pay creditors.
Additionally, if the Official Receiver/Trustee finds that the individual has a disposable income, they may be required to make monthly payments as part of an Income Payment Agreement or Income Payment Order to help meet some of the losses the creditors have suffered. They will have to make monthly payments towards the bankruptcy for three years.
