If faced with debts that have spiralled out of control then it is essential to take matters into your own hands and do something about your situation. If you have borrowed beyond your means then it can be all too easy to just bury your head in the sand and hope that some miracle comes your way. However miracles of course do not happen, life only gives us what we put into it and if we have got into debt then the only way out is to look into the options to getting out of debt. Bankruptcy is of course just one of the solutions that could be taken and it is one of the solutions that should be considered the last resort. There are many other ways of getting out of debt for you to consider and these include an IVA, consolidation loan or a debt management plan. An IVA gives many of the same things that bankruptcy does but it is less restrictive and should always be considered first.

If you are seriously considering bankruptcy then you would have to look into whether or not you would even qualify. There are certain criteria that would have to be met before you could even take this option. So who can become bankrupt?

• You can apply for bankruptcy if you owe debts of at least £750. If you do owe debts over this amount then your creditors could actually make your bankrupt if they wanted and you would have no say in the matter
  
• Only residents of either England or Wales can make themselves bankrupt or be made bankrupt
  
• You can be declared bankrupt if you have taken an IVA and had defaulted on the IVA

When taking the option of bankruptcy to get out of debt it is not the easy way out that many seem to think it is. You do not simply declare yourself bankrupt and then become debt free and not have worries. There are some main effects you would have to consider as they live with you for some considerable time. For instance you have to take into account that:

• Your assets would be taken into account when declaring bankruptcy. These could include your home, any savings, any shares you have or indeed anything of any real value. Your creditors could take this into account and ask that you give up these, for instances you could have to sell your home and car and the proceeds be given towards what you owe.
  
• Bankruptcy would be stated on your credit file. It would remain there for the year and even affect your credit status after this time. During this time you could find being approved for credit impossible.
  
• Bankruptcy would affect your status in the community. It would be listed in local newspapers so your friends, relatives and those around you would know of your financial problems. You would also not be able to take certain jobs or positions which include councillor or an estate agent for example
  
• You would not be able to be a company director

When looking at the list above you might be able to see why declaring bankruptcy needs be given a great deal of consideration and other solutions to becoming debt free could be far more suitable. The only plus point to bankruptcy is that your debts could be written off after 1 year. However the effect such as your credit file could still outweigh this as you could still find obtaining credit a huge problem and even if you are given approval for credit you could have to pay a higher rate of interest.