Bankruptcy vs Settlement

bauer

Hi,

Sorry if this has been covered before, I looked but couldn't find a thread.

All the interest is frozen, and am making token payments on my debts but I'm in a situation that is looking like bankruptcy is an option for me. There's a possibility of making settlements if that could be negotiated.

Before I bothered with that, I'm presuming paying a debt in part as a final settlement also has an adverse effect on your credit file going forward, so was wondering how that differs from bankruptcy?

Regards

NotEvanAPot

You would need to post some numbers (total debts, number of creditors along with monthly I&E) to receive much advice.

Broad overview, will it take you 6+ years to pay all debts off? If yes, and your circumstances meet the requirements of bankruptcy, it would be your best option medium term.

bauer

Thanks for your reply. It's not so much whether that would be best, it's the legacy of bankruptcy versus a settlement.

I know bankruptcy is on your record for 6 years, is that also true of an agreed settlement? How does that appear on your credit report and for how long?

NotEvanAPot

You are viewing bankruptcy incorrectly, it is not something to enter in to lightly or as the easier option. BR is a legal protection for the use of those that cannot meet their debt obligations.

It is also incorrect that bankruptcy is only definitely there for 6 years; varying degrees of reckless or fraudulent behaviour, a lack of cooperation and sanctions can mean that it is up to 15 years on a credit record to indefinite suspension of discharge (bankrupt for life, as the simplest explanation).

If you are viewing BR as just a method to not settle, you should be aware that an application can also be rejected.

To answer your question, 3 years from date of settlement would be factored and available on your credit report, actual last payment, not when it is agreed. You can also fall foul of missing one payment and being returned to square one, needing to clear the entire debt with an agreement torn up.

bauer

With respect, I absolutely am not viewing this lightly, hence the question. I'm just trying to make sure I know the ramifications of any potential outcome and came here for advice.

NotEvanAPot

You have missed the points that I have given you to consider then if you feel the need to prefix a response by highlighting respect. Your questions have related to, simplistically, would a settlement or bankruptcy disappear from my record sooner or which has the least chance of an impact long term - would that be accurate? If so, you are not approaching such a decision from the correct direction.

The reason you have received the advice as I have given it is because it is relevant with the pertinent points highlighted. As bankruptcy is a legal protection, all you will receive is advice, no one can make the decision for you.

Unfortunately, sometimes advice received is not always what you wish to hear, this does not make it inaccurate or wrong.

mjm3346

Bankruptcy is much more public than a settlement, can restrict you with some occupations, needs to be disclosed by you on various application forms* and is generally far more restrictive and long lasting than a settlement.


*not just for borrowing

sourcrates

Basically if your able to settle the debts, then Bankruptcy is not an option for you.

By putting forward the possibility of making settlement offers, then you obviously are not yet at the point where Bankruptcy would be an option.

As stated above Bankruptcy is a last resort, not a first response, your credit file should be the last thing on your mind, if you applied for Bankruptcy The OR would grill you about every last aspect of your finances, its a very serious step, right for some, not for everyone.

National_Debtline

Hi Bauer,

bauer wrote: »

Hi,

Sorry if this has been covered before, I looked but couldn't find a thread.

All the interest is frozen, and am making token payments on my debts but I'm in a situation that is looking like bankruptcy is an option for me. There's a possibility of making settlements if that could be negotiated.

Before I bothered with that, I'm presuming paying a debt in part as a final settlement also has an adverse effect on your credit file going forward, so was wondering how that differs from bankruptcy?

Regards

If we look at this purely from a credit reference point of view, then a partially satisfied debt will appear on your credit file for 6 years from the date the debt defaulted - assuming the default has been registered. If no default has been registered it will be recorded for 6 years from the date of settlement. So this will have less, long term credit reference implications.


Whereas bankruptcy will typically appear for 6 years from the date of the bankruptcy order but may have to be declared on future credit applications if you are specifically asked if you have 'ever' been bankrupt in the past. Therefore, bankruptcy can have more long term adverse affects on your ability to get credit.


Laura
@natdebtline

A4445

I was kept bankrupt for longer due to a BRU it was on my credit file for 7 years. I wouldn't recommend going bankrupt if you can settle it. It's hard going to job interviews where jobs require credit checks to have to explain why it's on your report.

I've done my time, I'm back to having a normal bank account, and I have a few credit accounts. I've not been asked yet on any application if I've been bankrupt. I guess it will come up on a mortgage application. I've got a large deposit so I guess it shouldn't matter.

Take legal advise and don't rush a decision