Debt Solutions
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Debt Solutions

What is Bankruptcy?

Bankruptcy is a formal insolvency procedure. You can apply to go bankrupt if you can demonstrate that either your debts exceed your assets or you are unable to pay your debts when they are due. There is no restriction on the level of debt you must have to apply.

We do not offer assistance in petitioning for bankruptcy because you can apply online through the central government website, GOV.UK. You’ll receive your decision online, usually within 28 days and, if your bankruptcy is approved, you’ll be contacted by the Official Receiver who will oversee your bankruptcy and will want to know about your financial history.

If you have surplus income after meeting your essential household and personal expenses, you will have to make payments out of your income for up to 3 years.

In addition, you will have to hand over any assets you have to the trustee in bankruptcy to be sold to repay your creditors. This does not include everyday items you need for your reasonable domestic needs but is likely to include your house if it can be sold for more than the mortgage outstanding.

Bankruptcy usually lasts for 1 year, and once you have been freed (discharged) from your bankruptcy, you are released from your debts (with certain exceptions).

Advantages of bankruptcy:

Debts are written off at the end of one year

Creditors can’t take further action unless the debts are secured on your home or other property

It allows you to make a fresh start after only a year

You may be able to avoid having to sell your home if your spouse, partner or a relative can buy your share of its value after any debts secured on it have been paid

You can apply online and pay in instalments

Brunette woman sat on the floor with a laptop, pointing left

Disadvantages of bankruptcy:

Your bankruptcy is entered on a public register

If you apply for your own bankruptcy, you will have to pay an adjudicators fee and deposit totalling £680

You will remain liable to pay certain debts – in particular:

  •  Student loans
  •  Fines
  •  Debts arising from family proceedings
  •  Budgeting loans and crisis loans owed to the Social Fund

If your situation changes for the better you will be expected to pay more to your creditors

Your employment may be affected

Certain agreements such as hire purchase agreements and mobile phone contracts may come to an end

You can’t act as a director of a company or be involved in its management unless the court agrees

You will be committing an offence if you get credit of £500 or more without disclosing that you are bankrupt

You may have a bankruptcy restriction order made against you for 2 to 15 years if you acted irresponsibly, recklessly or dishonestly

Bankruptcy will show on your credit file and will make it very difficult to obtain credit during this time.

Bankruptcy Frequently Asked Questions:

When you complete your bankruptcy application, you will need to make a list of your assets which the official receiver will take control of when your application is approved.

There are certain things which you will almost definitely lose, such as any savings that you have, including investments (but not your pension). You will also lose any high value items which aren’t essential, like a caravan.

The Official Receiver (OR) won’t take anything which is essential for work, or your household items like your cooker, washing machine, fridge, furniture and bedding. They also won’t take anything which doesn’t belong to you (like your children’s possessions, or a car that you drive which is owned by your partner). Only assets which can raise a reasonable amount to pay your bankruptcy costs and creditors will be taken, so you won’t need to list anything worth less than £500. You should also consider that this is the re-sale value, not what you bought it for.

It depends what your car is worth and whether you need it. If the OR determines that you need, for example to get to work or transport your children to and from school, and that public transport isn’t feasible, you will be able to keep a car worth up to £1250. If your car is worth a lot more than this, they can decide to sell it and allow you a cheaper replacement.

If your car is on hire purchase (HP), the OR will look into the agreement to see if there is any benefit in claiming the car. This will only usually be the case where you are fairly close to the end of your agreement and the car is worth a lot more than the outstanding balance on the finance agreement. If not, the OR will let the finance company know about the bankruptcy and, if there is a clause in your agreement that the agreement can be terminated if you go bankrupt, they may repossess and sell it. You will only be allowed to continue making payments to a car on HP if the payments are low and the car is essential e.g. you couldn’t do your job without it or it is needed for someone in your house with a disability.

If you are the sole owner of your property and there is equity, it will probably be sold to pay your creditors. If there is no, or negative, equity you’ll probably be able to stay in your home, but please note, the OR has up to 3 years to decide what to do with your property so equity could build up between now and then.

If you jointly own your property, the OR will want your share of the equity but the joint owner will be entitled to keep their share. They may ask the other person to buy your share, or they may apply for a charging order to register their claim for when it is sold. The OR can still force the sale of a jointly owned property if it is worthwhile to do so.

If you have equity and you want to keep your house, you may be able to ask a friend or family member to buy your share (the equity) from the OR.

It depends on your situation but, yes, your partner could be affected. There are a number of ways this could happen.

If you own a house together – please see ‘What happens to my house?’

If you are financially linked to your partner such as through a joint mortgage, joint debts or a joint bank account. If your partner applies for credit, lenders will take your credit report into account too and it may affect your partner’s ability to get credit.

If you have joint debts, your partner will become liable for them. Only your liability for the debts is wiped out through bankruptcy. See our ‘Joint debts’ information page for more information.

The fee for bankruptcy is £680. £130 of this is an adjudicator fee and £550 is a deposit. If your application is rejected, you’ll get the deposit back. The fee can be paid in instalments but it has to be paid in full before our application can be submitted.

If you can’t afford the fee and you are on a low income, you might be able to apply for a grant to pay the fee for you –

Bankruptcy won’t usually affect an ongoing tenancy. There may be a clause in your tenancy agreement which allows your landlord to end your tenancy, but if you’ve been keeping up with your payments they should have no need to do this. You may struggle to renew/get a new tenancy whilst you are bankrupt because letting agents will carry out a credit check.

You’ll need to let the OR know about any improvement to your situation, for example if you get a new job and are earning more money, or if you receive a lump sum of money. You may need to start paying, or increase your payments, to your bankruptcy. If you don’t tell them they can take action against you so it’s important that you are open about your situation.

If your situation gets worse, you should still let them know. Your monthly payments could be too high and might need reducing.

No, you no longer have to attend a court hearing. You will submit an application online and, if it is accepted, the OR will carry out an interview – usually over the telephone – with you.

Unless you are self-employed and the OR thinks you may have local creditors that need to know about your bankruptcy, it won’t be published in the local press. A notice of your bankruptcy will be printed in the London Gazette.

It depends how quickly you can get the information together for the application and pay the fee. Once your application is submitted, an adjudicator will make a decision within a few days – this is the point at which the bankruptcy order is made. The OR will then write to you within 2 weeks explaining what you need to know.