Does bankruptcy deserve to be stigmatised?
By Mr Bankruptcy
20th June 2024
When Charles Dickens’ father, John, was thrown into the Marshalsea debtors’ prison in 1824, twelve-year-old Charles was put to work at a blacking factory to provide for them. The shame and hardship of that time marked his writing as an adult.
One of the greatest business innovations introduced by Victorians was the concept of bankruptcy – being given a fresh start, with reasonable conditions, after falling into unserviceable debt. It meant people could take a chance on a business venture without the fear that failure would destroy them and their families.
But the word bankruptcy seems to have a stigma of its own, and bankrupts are still treated with suspicion. Do they deserve this reputation?
What is bankruptcy?
Bankruptcy is a simple legal process you can apply for if you can’t pay back your debts. Bankruptcy leads to a fair share-out of your assets among creditors, under the guidance of court appointed professionals.
Some of your assets are protected by law and you are given time to find accommodation if you have to sell your house to pay back debts.
The process stops a situation from getting any worse and puts a line under existing debts through a legal process that’s less threatening than being pursued by a crowd of angry creditors. There are several advantages to bankruptcy:
- All existing unsecured debts are written off
- Personal Bankruptcy only lasts for 12 months
- Creditors stop hassling you for their money
- You can engage a professional advisor throughout
- It’s better than prison!
But I’m not going to pretend that filing for bankruptcy is an easy opt-out; there is a downside:
- £680 to pay for a bankruptcy application to the Insolvency Service
- Your personal bankruptcy is advertised in the press
- A company director can’t hold their position any more
- If you borrow £500 or more, you must tell the lender you’re personally bankrupt
- You can’t hold certain positions in the community
- Your assets are in the hands of the Official Receiver
- Your credit rating is negatively affected.
So, not all good news, but these points don’t really explain the stigma around bankruptcy.
Fear of failure
In the UK we have a different relationship with failure to the more entrepreneurial Americans. They are proud to have a backstory of failure before bouncing back to success, but for British people shame is a more common emotion, and filing for bankruptcy sounds like signalling your business shortcomings.
It’s difficult to admit failure to family or business partners, but dealing with it on your own can lead to overwhelming stress and mental health issues. I know because I’ve seen it with clients, and I’ve experienced it myself.
But many successful businesses have filed for bankruptcy, quite often because entrepreneurs understand how it works and are encouraged to chance their arm. Sometimes it works, sometimes not. It may even be a strategic decision to reorganize or re-allocate finances which help you win next time.
It’s also important to remember that success in life is about more than career status, keeping up with the Jones’ or the size of your bank balance. This mentality can get people into debt in the first place. Success in life can be measured in charitable works, respect in your community, a happy family.
These successes depend on how you treat people, not your wealth, and bankruptcy gives you a fresh start to show your true mettle and rebuild your life.
The embarrassment
Although bankruptcy proceedings are technically public, no-one you know is likely to be killing time sat at the back of a county court, or browsing through The Gazette.
You don’t have to tell everyone you know about your situation and your bankruptcy consultant owes you a duty of confidentiality.
Can you be trusted?
Some clients fear they will be seen as untrustworthy, dishonest or irresponsible, but the truth is that most of the people I advise have filed for bankruptcy because of reasons beyond their control – a downturn in the economy, redundancy, divorce or illness.
You aren’t alone when you file bankruptcy.
Bringing your debt problem into the open helps your family or business partners to understand your problem and that you are willing to do something about it.
If you are holding back from filing bankruptcy out of fear, guilt, or shame, you aren’t alone, and there’s plenty of professional help out there, in the private and charity sectors. Bankruptcy is one of the most valuable legal protections we are afforded. It’s not the end, but a new beginning.
James Rosa Associates, personal bankruptcy consultancy services
If you’re thinking of filing for bankruptcy as an individual or company director, we can help in a non-judgemental and supportive way. Get in touch with us and we’ll discuss your current situation and whether personal bankruptcy is the appropriate solution for you.
We dedicate a client director to your case through to the end, operating on your behalf every step of the way. We will look at how to protect any third-party interest (e.g. property shared with your spouse), produce all the legal documentation needed and physically attend court, as well as meeting with the Insolvency Service.
We also offer a full range of professional services to individuals and business owners/ directors who face unmanageable debt and are looking for a solution, or anyone who is involved in a civil or commercial dispute, including:
We are authorised and regulated by the Financial Conduct Authority (FRN665061) to work with clients to produce bespoke solutions to fit their specific circumstances.
Find out if you qualify for a free consultation
If you want to deal with an unmanageable debt, or bring a dispute to a swift and cost-effective resolution, then contact James Rosa Associates, ring 0845 6807217 or email enquiries@jamesrosa.co.uk and find out whether you qualify for our free consultation service.
Please be advised that all views expressed in these posts are those of the author and not of James Rosa Associates ltd.