When people find themselves in serious financial trouble, often the only way to keep their head above water is to declare themselves bankrupt. While declaring yourself bankrupt does give you some breathing room and can get debt collectors off your back, it also comes with some serious repercussions.
Firstly, you will not be able to apply for any personal loans or credit cards. You will not be able to have a standard bank account where you’re able to set up direct debits or accept your salary direct to your account. It also affects your ability to get car insurance at a reasonable price. Insurance providers take people on based on risk and if you, or someone you’re living with, has been declared bankrupt in the past, you will often be considered too much of a risk to take on.
Should I declare myself bankrupt?
If you find yourself in a lot of debt then it might seem like declaring yourself bankrupt is the only option but there are often alternatives available that don’t come with as many consequences. One option is to apply for a Debt Relief Order (DRO) or Individual Voluntary Arrangement (IVO). This is suitable if your debts are not extremely high but you still find them unmanageable due to your financial circumstances. Declaring yourself bankrupt is usually only advised to people who have in excess of £50,000 of unsecured debts.
If bankruptcy is your only option, it must be declared by the court and usually lasts for one year, although it can be longer when you’re paying off debts.
How to find car insurance when you’ve been declared bankrupt
Aside from the inconvenience of not having access to a regular bank account, finding car insurance when you’ve been declared bankrupt can be an almighty pain.
Fortunately, specialist insurance providers cater for people who have been declared bankrupt, as well as those with criminal and motoring convictions. They will take applications on a case-by-case basis to offer you an insurance policy that provides the level of cover you need, at a fair price.