Millions of people in the UK are likely to have some form of debt. Whether it’s in the form of a mortgage, credit card bill, personal loan or anything else, in many cases, debt is manageable and can be paid off with ease by anyone in secure employment. Sadly, for many people, they may find that their income is insufficient to help them pay off what they owe on schedule.
In such a situation where paying off debts in full and on time is rendered impossible due to lack of income, it can be hard to know what’s coming next. For people who either have their own home or live in rented accommodation, the circumstances can be a little different, but the outcome can sometimes be the same – bankruptcy.
The homeowner’s conundrum
As far as homeowners are concerned, if they don’t have the cash to pay off their debts, whatever they may be, they may wonder what might happen to their home. As it’s likely to be their most valuable asset, selling or losing it may be the only option if they are to appease their creditors. When the home is only partially paid for with a mortgage, then it becomes a little easier to understand.
If a home hasn’t been paid for in full due to the homeowner falling behind on mortgage payments, then the mortgage provider will usually have the right to take the property in order to recoup what they’re owed. Although there are some support mechanisms in place for homeowners who are currently out of work, it’s usually the thing to do as far as homeownership and debt is concerned.
A last resort?
For many people facing severe financial difficulty, especially when faced with a massive amount of personal debt to clear, their options might be limited in terms of repayment. If, say, anyone is unemployed or on a low income, they might get some respite from paying what they owe in full, but bankruptcy may be the only choice if they can’t get rid of their debts in any other way.
To apply for bankruptcy, it’s essential to have sufficient proof of not having the assets necessary to pay off debts without reaching some sort of compromise with creditors. This is often the way for anyone who has experienced a drop in income from becoming unemployed, while anyone who has seen their business go into liquidation will probably go down the same route.
Non-homeowners face more risk
While homeowners have at least one valuable asset, the same cannot be said of non-homeowners, who are likely to have less money and assets to help pay off any serious debts. 77% of people who file for bankruptcy are non-homeowners, a figure which shows how much more vulnerable they are financially.
Aside from have an asset as valuable as a home they own, non-homeowners are also more likely to become bankrupt because they may earn less money than homeowners, face higher costs in terms of rent and face a slightly increased risk of going out of work. There seems to be a direct correlation between joblessness and bankruptcy.