Poor Boris Becker. Once the boyish prankster of Centre Court – now the 49-year-old, three-time Wimbledon champion has been declared bankrupt by a London court.
It's a last resort, but declaring yourself bankrupt can be a solution if you can't find a way you'll ever be able to repay your debts.
Bankruptcy can help you clear your debts and make a fresh start, but there are many serious considerations that will stay with you for some time.
It is a decision that should not be taken lightly, and prison could await you if you wrongly declare yourself bankrupt just to avoid repaying debts.
When is bankruptcy a solution?
If the assets you own cannot cover your debts and your creditors are unwilling to enter into an agreement for you to repay over time at an affordable amount, then bankruptcy may be your only option.
You can apply to have yourself made bankrupt, or a creditor can apply to make you bankrupt, without your consent – the fate of Boris Becker, whose legal team fought in court to avoid this outcome.
Becker believed the sale or remortgaging of a property he owned would have covered his debts, but the creditor was not prepared to wait.
In the fourth quarter of last year, 2,853 bankruptcies were made on application from the debtor, while 957 were creditor petition bankruptcies.
When bankruptcy is not a solution
Here is an important point. Your house is an asset if you own it. Your car, jewellery and any luxury goods too – these assets can be seized and sold by the court [usually a court appointed receiver or insolvency practitioner] to repay creditors.
So, if your assets are worth more than your debts, bankruptcy is not the best option for you.
Debt charity Step Change, says: "Bankruptcy should not be taken lightly as it is a big step and any assets you own, such as your car or house, will usually be sold."
Let's take a closer look at the positives and negatives of bankruptcy.
· You get to make a fresh start
· You can no longer be contacted by your creditors
· Money you owe is written off
· You remain bankrupt for a year – if you try to borrow more than £500 you must let your creditor know you are bankrupt
· Bankruptcy stays on your credit file for six years, making it almost impossible to get a loan
· If your income is high enough you'll be required to make contributions to your creditors under an income payments agreement
· Assets [car, house, etc] will be sold
· Some professional bodies disqualify bankrupts