Bankruptcy is an option that often has to be considered when an individual cannot pay their debts as they fall due. For a first time bankruptcy within a 15 year period, for debts under £20,000, the procedure is known as a Summary Administration and you may be discharged after two years.

A first time bankrupt with debts over £20,000 may be discharged after three years. Although bankruptcy has a bad stigma and is publicly advertised, it should always be considered when dealing with individual insolvency cases.

Please note that if your are ever faced with the prospect of bankruptcy you should look at alternatives as soon as possible such as the Individual Voluntary Arrangement procedure (IVA).

Bankruptcy is one way of dealing with debts you cannot pay.

. You lose control of your assets.

. You cannot obtain credit for over £250 without the permission from the lender.

. You cannot act as a company director.

. You cannot take any part in the promotion, formation or management of a limited company (LTD) without the permission of the court.

. You cannot trade in any business under any other name unless you inform all persons concerned of the bankruptcy.

. You may not practice as a Charted Accountant / Lawyer

. You may not act as a Justice of the peace (JP)

. You may not become an member of parliament

. You may not become a member of the local authority.

. Your credit is affected for many years after the annulment.

. You may be publicly examined in court.

. For the person involved, bankruptcy provides relative peace of mind and possible automatic discharge after two or three years.

. For the creditors, bankruptcy allows a full investigation of the debtor's affairs to be carried out.