The courts have numerous ways to help someone who is no longer able to cope with the debt they have accrued. Before filing for bankruptcy you can consider one of these two court options:
The last option is bankruptcy. By declaring bankruptcy, you will be released from your debts after two to three years. But your finances will be investigated and during these two to three years, you will be expected to make reasonable payments to your creditors to pay off some of the debt.
The pros to declaring bankruptcy are that you will be absolved of all your debts and debt collectors can no longer pursue you. It will put a final end to the stress and uncertainty of dealing with creditors. And in some cases, it is a better option than an IVA, because you probably will end up paying less in the long term.
Unfortunately, the cons outweigh the pros in bankruptcy. Once you declare bankruptcy, you will loose all assets that are in your possession. Most everything will be sold and liquidated to raise money to repay as much of your outstanding debt as possible. Counter intuitively, bankruptcy can be expensive. You will be liable for any fees and costs incurred by the courts, insolvency service and any trustees, as well as a 15% levy on all sums received by the official receiver or trustee. All your financial affairs will be open to minute scrutiny by the receiver and/or courts.
There are also consequences long after you have declared bankruptcy. You will probably have a very difficult time getting any kind of credit or even opening a bank account. If you are trying to obtain a credit of more than £250, you must disclose your status as an undischarged bankrupt. Also, you will be barred from holding certain public offices, such as MP or councillor.