Is bankruptcy as scary as it sounds?

Q I'm being pursued by the Inland Revenue for a large old tax bill, for which I would have to borrow a lot of money to pay. They are threatening me with bankruptcy. Is bankruptcy as scary as it sounds, or actually an appropriate tool with which to handle a burdensome debt?

I have no idea what the process involves, how intrusive it is, how it affects day to day life, or even how long it lasts. I'd be grateful if you could give me some pointers.

VO

A Deciding to go bankrupt is not an easy decision and depends on a number of issues. Do you have any assets which could be claimed by creditors - including your home? Is there any way you could renegotiate the terms of your tax bill so that you pay it back in small instalments or make a reasonable offer to pay? Would you be unable to do your job if you were declared bankrupt - for example if you were a lawyer or accountant? Are you likely to need credit in the future - for example a mortgage?

Sophie Brookes, manager of the charity National Debtline in Birmingham, says: "If you have got a house with a lot of equity in it then the worse case scenario would be that you lose your home. You could discuss with the Inland Revenue the possibility of agreeing to a voluntary charge on your property while you repay your debt."

If you don't own the property and you have no equity in it you could consider going bankrupt, but you need to talk it through first with an expert. The National Debtline can counsel you on the best course of action. The website is at www.nationaldebtline.co.uk. The telephone number is 0808 808 4000 and lines are open 9am to 9pm Monday to Friday and 9.30am to 1pm on Saturdays.

If you do decide to go bankrupt, you may be officially discharged from being bankrupt after two or three years, but it will be held on your credit reference file for six years. This may affect your credit rating and your ability to apply for a credit card or mortgage.