What does it actually mean to go bankrupt?

Think leading a well-known political party means money is no problem? Think again. Nick Griffin, the leader of the British National Party, has just been declared bankrupt with debts of £120,000.

On the face of it, this makes little sense, says Ian Burrell in The Independent. Griffin could have pulled in a “near £1m income” over the last five years as an MEP if you add his salary and allowable expenses.

He is hardly the first apparently highish-income earner to find himself with a declaration. Griffin joins the likes of Westlife star Shane Filan, Kerry Katona and TV chef Clarissa Dickson Wright.

Bankruptcy isn’t what it used to be: you are normally discharged after a maximum of 12 months and debt agencies across the board are keen to stress that there is no longer a stigma attached to defaulting.

Indeed, Griffin is so relaxed about the whole thing he announced to his Twitter followers that being bankrupt made for a “good day” in that it left him, if not his creditors, “free from financial worries”. But he might be taking the whole thing too lightly.

Bankruptcy is still a pretty unpleasant thing. As all official documents on the matter state, you will have to give up “any possessions of value and your interest in your home”, for one thing.

You will be left with little but your clothing, bedding, furniture and “basic items you and your family need in the home”. You also lose any privacy you might have hoped to have: you have to comply with all requests from the official receiver (risking arrest if you do not) and hand over all documents relating to any cash, investments or insurance you might have.

You also lose access to all your bank accounts and cannot obtain credit over £500 during your bankruptcy without disclosing it to the lender. Even after you are discharged you aren’t always actually free: the court can hold charges over your house, insurances and inheritances and “can deal with them at any time in the future”.

Then there are the other problems. Griffin reckons that the order won’t stop him “being or standing as an MEP”. Maybe not, but it could stop him taking up a more respectable profession.

If you need to be a “fit and proper person” to do your job, you may find you don’t have a job any more. A bankrupt is also not able to be a trustee of a charity or a pension fund, nor can he promote, form or manage a limited company without the courts’ permission.

For most people, the day on which they are declared bankrupt is a day to be avoided – at least until proper advice is sought. If you need that, start with the Citizens Advice Bureau.

• Stay up to date with MoneyWeek: Follow us on TwitterFacebook and Google+

 

MoneyWeek magazine

Latest issue:

Magazine cover
What a farce!

John Stepek on surviving the Greek fallout

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

From ADRs to Z scores – all the terms you wish you understood, but were too embarrassed to ask about.

Gervais Williams: if you want real dividend growth, buy small-cap stocks

Merryn Somerset Webb interviews small-cap stock expert Gervais Williams about how penny shares outperform blue chips 'again and again'.


Which investment platform is the right one for you?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from, with varying fees and charges. Find out which is best for you.


30 June 1937: The 999 emergency services line opens


On this day, the 999 emergency services telephone line opens in London, but it wasn't until a week later that the first call was received when a man spotted a burglar in his garden.


Anatomy of a Grexit: how Greece would go about leaving the euro

Jonathan Loynes and Jennifer McKeown, economists at Capital Economics, look at the key issues and challenges of a Grexit, how it might be best managed, and set out a timetable for change.