Should I go bankrupt in order to clear my debt?

Q I graduated a year ago and I am ?12,000 in debt because of a combination of student loans, credit card debt and other financial problems. I have heard that if you go bankrupt you can clear your student loan all in one go and you don't ever have to pay it back. This sounds very attractive to me right now, as I can't really see how I am ever going to get out of this mess. I'm tempted to do it and sort out my debt for ever, but is there a catch?
DK

A The catch is that being a bankrupt will affect your chances of getting a mortgage, credit or, in some cases, a job in the future. The reason that this issue has come to light recently is due to a planned change in the insolvency rules. The proposals are part of the government's attempt to encourage more people to become entrepreneurs, and it will reduce the number of years you have to wait before you are discharged as a bankrupt (ie until the slate is wiped clean, credit-wise).

Though it may sound tempting, and could be technically possible, bankruptcy is a drastic step, and you should take proper advice from a money expert before you even consider it.

Here are a few things to think about before you plunge in. If you are considering a job in the legal profession - eg as a solicitor - then you won't be able to practise as a bankrupt. Mortgage companies and credit card providers will be very wary of lending you money in the future - which may affect your plans to buy a home for many years. A record of unpaid debts sits on your credit file for six years - so you need to be aware that mobile phone companies, banks and building societies will know this if they do a credit check on you.

It's not as simple as getting rid of your student loan once and for all. If you are having financial difficulties, your best plan of action is to speak to a debt counsellor or visit your local Citizens Advice Bureau for some specialist advice. Going bankrupt is a serious decision and not a quick fix for short-term money problems. You may be better in the long run to organise a structured repayment plan instead.

Useful numbers
National Debtline: 0808 808 4000
Consumer Credit Counselling Service: 0800 138 1111