Although declaring bankruptcy can clear debts within 12 months, financial advisers are keen to remind borrowers that they can face further financial problems for years to come.
Insolvency can adversely affect a person’s credit rating for up to six years, making it difficult and often impossible to obtain a mortgage, bank account or even a mobile phone.
With a record 23,251 people declaring insolvency in the first quarter of 2006, many experts are concerned that overly indebted borrowers are viewing bankruptcy as an easy way out, without considering the repercussions or alternatives.
“Bankruptcy seems an attractive option because you are discharged after just a year, but there are massive repercussions for years afterwards,” Mark Ward from rating agency Call Credit told the Telegraph.
Despite changes in legislation, reducing the length of time needed to discharge debts from three years to one, borrowers are advised to always see bankruptcy as a last resort.