Bankruptcy is a debt solution for people who are unable to pay their unsecured debt each month. You can apply to make yourself bankrupt or a creditor (company you owe money to) could make you bankrupt. To be applicable you must live in England, Northern Ireland or Wales – in Scotland it’s known as Sequestration.

    You can enter the solution by applying online via the Insolvency Service in England and Wales. In Northern Ireland you can apply via the High Court. The cost in England and Wales is £130 application fee and £550 for the deposit (£680 in total). In Northern Ireland the cost is £144 court fee, £525 for the deposit and £7 solicitors fee (£676 in total).

    Before you apply it’s essential you get advice tailored to your circumstances to ensure bankruptcy is the right option for you – it’s very difficult to reverse the decision once it’s been approved. If you want to receive specific advice on your circumstances then call one of these debt advice charities for advice:

    StepChange: 0800 138 1111
    Debt Advice Foundation: 0800 043 40 50
    Citizens Advice Bureau: 0808 223 1133
    National Debtline: 0808 808 4000

    Bankruptcy Advice

    You can apply yourself or if one of your unsecured creditors is owed at least £5,000 (or a share of debt totalling £5,000) they can petition for your bankruptcy.

    In April 2009 the Debt Relief Order (DRO) was made available as a new route into bankruptcy. The DRO is an easier and cheaper route to become bankrupt but only people who meet the qualifying criteria can enter the solution. If you owe less than £30,000, you don’t own your own home, have a low disposable income every month and don’t have any assets worth more than £1,000 then the DRO could be suitable for you.

    The cost to enter a debt relief order is £90 which you must pay to apply.

    How Do You Go Bankrupt?

    To determine if bankruptcy is the best solution for you, you should speak to a qualified debt adviser.

    You no longer need to attend court and can apply online (except in N.Ireland). You will be asked to supply information about your debts, income, expenditure and assets. If you have creditor statements or letters from bailiffs you should add these too. You then pay your application fee and your application is referred to an adjudicator.

    An adjudicator will assess if you can pay your debts and whether bankruptcy is appropriate for you. After the adjudicator agrees with your application, you will no longer need to liaise with your creditors and an official receiver / insolvency practitioner will be appointed. They will be responsible for setting an income payment order (if applicable), realising any assets for the benefits of creditors and communicating with your creditors. When you’re made bankrupt your details will be listed on the Insolvency register and it can affect your employment opportunities. It’s important to check your contract of employment before entering any insolvency solution.

    You will speak with your official receiver as it’s their responsibility is to assess how much money you can afford to repay towards your debts. The official receiver will consider your available disposable income each month for 3 years and potentially the sale of assets like a house, car or investments (if there’s any realisable equity). Creditors cannot request their money back when you are in the solution so you are not required to make payments to your debts, instead you should liaise with your official receiver.

    Once you’re discharged, usually after 1 year, your outstanding debts will be written off. Income payment arrangements / income payment orders will last for 3 years.

    If you proceed with bankruptcy without receiving debt advice then this can mean that assets are sold and you weren’t aware they would be included within the solution. Also, there are guidelines on acceptable levels of expenditure and if you have a disposable income you could be asked to pay this to the official receiver each month.

    It’s for this reason it’s advisable to speak to a money advisor before proceeding.

    StepChange: 0800 138 1111
    Debt Advice Foundation: 0800 043 40 50
    Citizens Advice Bureau: 0808 223 1133
    National Debtline: 0808 808 4000

    Bankruptcy

    What Is Not Included In Bankruptcy?

    There are some debts which are not included, for instance, if you owe money to your student loan this cannot be included within your bankruptcy. Similarly, if you have any secured debts, these are not included and you should maintain payments to these debts.  This is typically the case if you have a mortgage on your property with a secured loan too. If you are unable to maintain payments to your secured loan then you would risk your property being repossessed. Any debt which has been accrued via illegal or fraudulent means can also not be included. Child maintenance and TV licence arrears can also not be included.

    You must continue to make payments to necessary expenditure such as gas, electricity and council tax once you are in any debt solution. Failure to make these payments could mean you obtain new debt which won’t be included.

    Benefits
    1. You will no longer have to negotiate or communicate with your creditors.
    2. Once your bankruptcy is completed you will be able to regain control of you finances and move forward without any debt.
    3. You no longer have to make payments towards your creditors. If you have available disposable income you will have to contribute this under an Income Payment Order for 3 years.
    4. Creditors won’t be able to take any further action against you.
    Negatives
    1. Your credit rating is likely to be severely affected.
    2. You cannot acquire credit of £500 or more without disclosing you are bankrupt.
    3. You cannot be a director of a limited company.
    4. You may lose your home (if it has equity), car or any other assets over £1,000.
    5. Some employers will not allow you to enter bankruptcy and in doing so you could lose your job. You should check your contract of employment first.
    6. If you receive income for employment, a private pension or any other form of income which is not state benefits then you may be asked to make payments to your bankruptcy for 3 years.
    Bankruptcy FAQ
    How Do I Make Myself Bankrupt?

    By completing the forms and paying the necessary fees you can apply. You will be asked to complete the Debtor’s petition along with a statement of your affairs.

    What Is Cost?

    Fees vary depending on where you live in the UK. 

    In England and Wales the cost is £680.

    In Northern Ireland the cost of is £683.

    What Debts Are Included?

    The majority of your debts will be included in the debt solution.

    Debts which cannot be included are:

    • TV licence arrears
    • Child maintenance arrears
    • Court fines
    • Fraudulently accrued debt
    What Does Bankruptcy Mean?

    Bankruptcy can have a severe affect on your life and entering it is a decision which shouldn’t be taken lightly. 

    It should help clear your debt, enabling you to move forward without the same financial worries. 

    What Happens After The Solution?

    Normally, you will be discharged after 1 year, with your debts cleared. 

    In some instances a person will be asked to make a payment each month for 3 years. This is called an income payment order.

    In rare cases, the official receiver will extend the the solution for up to 15 yrs. This is only likely to happen should the debt have been accrued via dishonest or reckless actions. 

    Is It Possible To Enter A Joint Bankruptcy?

    No, if a couple both have debts and are equally suitable for the solution, then they would need to apply separately. 

    How Long Does It Last?

    You would typically be in the solution for 1 year only. After the year is complete you will be debt free and the debt, along with interest and charges, will be written off. You may be asked to contribute towards your debt from your available income for 3 years.

    You will be asked to make your payment and submit your forms. 

    An Official Receiver is appointed to manage your bankruptcy. It is the job of the Official Receiver to assess your income, outgoings, pension, assets, bank statements and the debts. Should the Official Receiver believe you are able to make a payment they will discuss their findings and set a monthly the amount.

    Will I Be Able To Get Credit Ever Again?

    Obtaining credit after leaving the solution can be difficult. Your credit file will remain with a default for 6 years. This will impair your credit score and mean you may not be able to obtain credit for some time. If you are able to obtain credit it may mean a higher than usual interest rate.

    How Quickly Will My Debt Be Written Off?

    Your debt will be cleared at the end of the solution. After the year you will no longer owe the unsecured debt. Interest and charges are frozen and get written off at the end of the solution.

    Will Anybody Know?

    Your bankruptcy will be recorded within the London Gazette and also within the Insolvency register. The London Gazette is a subscription only publication which is used within the financial institution. The Insolvency register is available to access online.

    What Happens To Interest And Charges On My Debt?

    Your interest and charges on your debt continue to accrue until the end of the solution when they are written off. You should expect to continue to receive statements from your creditors until you have been discharged.

    What Is An Income Payment Order?

    An Income Payment Order is a set amount of money which has been determined you must pay towards your solution by the Official Receiver for 3 years.  If you are considered to have disposable income each month then this will be required for the benefit of your creditors.

    What If I Can’t Afford The Payment To My Income Payment Order?

    The amount of monthly payment you are asked to make in an Income Payment Order is decided by the Official Receiver. If you feel the amount they have set is incorrect you should contact your Official Receiver and explain why you can’t afford the payment. The Official Receiver will use industry financial guidelines, the statement of affairs and necessary documentation to make a decision on how much you can afford.

    A Creditor Is Making Me Bankrupt, What Can I Do?

    A creditor must have sent you a statutory demand before presenting the bankruptcy petition to the court.

    Please call a debt advice charity as soon as possible for advice:

    StepChange: 0800 138 1111
    Debt Advice Foundation: 0800 043 40 50
    Citizens Advice Bureau: 0808 223 1133
    National Debtline: 0808 808 4000

    What Will Happen To My House / Assets?

    The Official Receiver is interested in the equity / value of items. So, if your house is worth £80,000 but your mortgage is £100,000 then the property is in negative equity of £20,000. This means you would be able to retain your property in a if you wished, and could afford the repayments. Should you have realisable equity within your house then you may be asked for the equity. This usually means a sale of the property is required, however if a third party were able to buy out your share of the equity you could retain the property.

    The Official Receiver has 3 years from the date you enter the solution to decide if there is any value in the property.

    Can I Keep My Bank Account?

    If you owe money to your bank then it’s advisable to change bank account to a basic account with a bank you don’t owe money to. Barclays and Co-op are recognised as the best basic bank account providers for people with bad credit.