Under bankruptcy your existing assets including your home can be sold to repay your creditors. Therefore bankruptcy is a more sensible option where you have few assets.

Only the property owned by the debtor is directly at risk under bankruptcy. In the case of jointly-owned property e.g. the family home, the trustee can sell it to realise the value of the debtor's share.

The trustee also has the power to investigate any gifts or undervalued sales made in the previous five years. If any gifts were made whilst the debtor was insolvent, the trustee can claim the value of the gift, or undervalued part of the goods, from the person who received it.

As an undischarged bankrupt it is an offence not to declare your status if you apply for credit of more than £500.

An undischarged bankrupt, will also find it difficult to run a business due to the fact that it will prove virtually impossible to obtain credit facilities. You will not be allowed to hold the position of Company Director, without prior approval from the court.

Apart from the position of Company Director, there are other roles you cannot hold if you are an undischarged bankrupt: including councillor, school governor, magistrate, Member of Parliament or estate agent. It’s also virtually impossible to practice as a Solicitor or Accountant due to rules surrounding these professions.

If you are operating your business as a Sole Trader you should be aware that the bankruptcy order will be advertised in the local press, which has the potential to damage both your business and personal reputation.

As a homeowner bankruptcy will cause you problems in that it will hamper your ability to move to another property due to your inability to borrow money. Tenants may find it a problem raising the deposit or the upfront rental payments if they are denied the ability to borrow money.

Declaring bankruptcy can be an extremely stressful experience, especially as there may be a public examination of your financial affairs in court.

An advertisement will be placed in the local newspaper notifying of a person's bankruptcy and inviting claims from anyone who you owe money to. These details can also be viewed online on the Insolvency Service public register.

For many there is still a stigma attached to declaring bankruptcy and debtors can be made to feel like second class citizens.