An individual can be faced with bankruptcy if they are unable to pay their debts. Becoming bankrupt involves a formal process of applying to the courts to be declared bankrupt, at which point an Official Receiver will be appointed to manage your financial affairs. Any assets that you owned prior to being declared bankrupt can be sold to discharge your debts. The bankruptcy period ends after one year, and once you have been discharged, all of your debts will be cleared and you can start afresh. There are however, negative effects that may continue after your bankruptcy period; your credit rating will be affected, and it can affect your employment prospects in certain professions. Being a bankrupt is a legal status, and even once the bankruptcy process has been complete, and an individual has emerged from bankruptcy, they can be referred to as a former bankrupt.

See also: