The facts about being declared bankrupt and how it affects your life

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Duncan James is another celeb who's been forced down this life altering route...

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Blue singer Duncan James and party boy Calum Best have just been declared bankrupt, but they're not the only famous faces who've had to give up their assets in order to pay off debts. Kerry Katona, Westlife star Shane Filan, ex-EastEnder's actor Joe Swash, actor Neil Morrissey and even MC Hammer have all been declared bankrupt in the past, drastically altering their lives.

Although bankruptcy might sound like a convenient way to wipe away debts that you can't pay, it's actually a lot more serious than that. Being declared bankrupt is a life changing event that is only considered as a last resort when there is absolutely no other option.

Want to know more? Take a look at the facts about bankruptcy below or visit the official government guide to the issue here.

How do you get declared bankrupt?

To be declared bankrupt the court has to issue a bankruptcy order against you. There are two reasons that this might occur; either you are unable to pay your debts or your creditor or debtor will apply to make you bankrupt so they can settle your debts. But this isn't just a case of wiping your slate clean if you've spent too much money at Topshop...if were that easy we'd all be doing it!

What happens when you're officially bankrupt?

All of your assets are seized to pay your debts. The only things you are allowed to keep are any tools needed for your job (a painter and decorator would get to keep his/her brushes) and any household items like clothing, bedding and curtains. However, you may be required to give these belongings up if they cost more than a reasonable replacement. Basically, if you've got designer sheets you'll be expected to buy Primark! Because the majority of your assets will probably be tied up in your home, you're likely to lose that too.

What are the restrictions?

Anyone who is declared bankrupt will be required to follow certain restrictions. You can't borrow more than £500 without informing the lender that you've been declared bankrupt. This means that you will lose your home, but you can't get another mortgage, effectively forcing you to live with someone else. You can't act as a director of a company or manage or promote a company without informing everyone involved that you are bankrupt. These conditions are normally imposed for 12 months, but if your reasons for declaring yourself bankrupt in the first place are deemed to be because of your own dishonesty or carelessness these restrictions may be extended.

How will your money be affected?

The 'official receiver' assigned to your case will take your credit cards, cheque books and debit cards and will freeze all of your accounts. Your trustee (the person assigned to look after you and vouch for you) can release money urgently required for food or shelter. Things get even more complicated if you've got joint accounts, rent a house or have a pension. You may be required to make monthly payments from your income to pay off your debts. It's safe to say you lose the majority if not all of your financial freedom.

What do you think?

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