Bankruptcy is available to people who live in England, Wales or Northern Ireland

If you live in Scotland, the alternative to Bankruptcy is Sequestration.

Bankruptcy is only considered as a last resort, and we will review all other debt solutions with you before bankruptcy is advised.

Benefits

  • Your unsecured creditors can no longer pursue you or take action against you to recover what you owe
  • You will no longer have to make further payments to your creditors
  • All of your debts will be written off, providing you with a fresh start
  • You will be able to keep income from benefits
  • Any surplus money from non-benefit income will be paid to the Trustee of your Bankruptcy
  • After 1 year, you can expect to be discharged from your debts and bankruptcy restrictions

Things you need to know

  • The Trustee can be either an Insolvency Practitioner (a professional person who holds a license) or the Official Receiver (an officer of the Court).
  • Any valuable belongings (assets), will usually have to be sold
  • There is no minimum amount of debt required for you to go bankrupt.
  • For a creditor to make you bankrupt you must owe at least £750
  • Bankruptcy may restrict your ability to obtain credit in the future and your credit rating can be affected for many years
  • As an undischarged bankrupt, you are not permitted to start up or be involved in the day-to-day management of a limited company
  • There are certain restrictions to employment. Certain financial organisations may not allow you to keep your job. In advance of going bankrupt, you should check the terms of your contract of employment.
  • Hire purchase agreements may contain a clause which terminates the agreement automatically if you become bankrupt
  • If you petition for your own Bankruptcy you will have to pay £525 towards the costs of administering your bankruptcy and a court fee of £180 (£130 from April 2016) In Northern Ireland the court fee is £115.
  • If you are unable to afford the Bankruptcy costs, a Debt Relief Order may be a better option for you.
  • Your Bankruptcy will be advertised in the Gazette. The Trustee may also decide to advertise in a local paper.

For more information on Bankruptcy, read our questions and answers.

Questions & Answers

What is bankruptcy?

Bankruptcy is a legal process which can be started by you or your creditors.

During the Bankruptcy, your Trustee will sell your valuable assets and collect any surplus income from you.  After deducting costs of the Bankruptcy, your Trustee will pay any available dividend to your unsecured creditors.

The Bankruptcy legislation enables your debts to be written off as a result of completing the process.

How do I go bankrupt?

To start your own Bankruptcy, you must complete the relevant forms, Statement of Affairs and Petition, submitting these to your local County Court together with the fees.  If your debts total £100,000 or more and you live in London, you need to approach the High Court.

The Court will then set a Bankruptcy hearing date. At the hearing, the Court will either:

  • Postpone your Petition to give the Court time to gather more information and another date will be set; or
  • Dismiss your Petition; or
  • Refer you to a Debt Relief Order adviser if the Court believes a Debt Relief Order would be more suitable; or
  • Appoint an Insolvency Practitioner if the Court thinks an IVA would be a better solution; orMake a Bankruptcy Order, which has the effect of making you bankrupt.

How long will I be bankrupt for?

Normally you will be discharged from the Bankruptcy after 1 year.  If you do not co-operate during your Bankruptcy, your discharge could be delayed.

Whilst you can be discharged after 1 year, you may still be required to continue making contributions from your surplus income for up to 3 years.  After your discharge your Trustee may need to stay in office to deal with any unsold assets.

How much does it cost to be made bankrupt?

You will have to pay £525 towards the costs of administering your Bankruptcy, and the Court fee of £130 from April 2016. In Northern Ireland the court fee is £115.

Depending on your circumstances you may be able to apply for the Court fee to be reduced or cancelled.  You can apply if you receive certain benefits or working tax credits, your income is below a certain level, or your surplus income is below a certain level.  To apply you need to complete a separate form (EX160) and submit this to the Court with your Petition paperwork.

There is a fee of £12 (Northern Ireland £7) to swear the statement of affairs in the High Court or before a solicitor, however, in a County Court, there is no charge for this.

If you are a married couple and you are both petitioning for Bankruptcy, you will each have to pay separate fees.

If you were a business partnership, each partner will have to pay separate fees.

Please visit our important information page for an overview of all debt solution fees.

What are the consequences of bankruptcy?

We’ve highlighted the consequences you should be aware of:

  • Any valuable assets that you own will usually have to be sold
  • You may struggle to obtain credit in the future and your credit rating can be affected for many years
  • Your bankruptcy will be advertised in your local paper
  • You are not permitted to start up or be involved in the day-to-day management of a limited company
  • You cannot act as a Member of Parliament, and there are certain other restrictions, for example acting as a member of a local council or school board, etc.
  • You may not practise as a chartered accountant or a lawyer, or act as a Justice of the Peace
  • Any hire purchase agreements that you have may have a clause which automatically terminates them if you become bankrupt
  • A fee is usually payable with your application

Are debts due to all my creditors written off?

Not all types of debts are written off. Debts that are not automatically written off include:

  • Secured loans, such as a mortgage on a property, and other secured debts;
  • Court fines;
  • Maintenance payments and child support payments, including any lump sum orders and costs that have arisen from family proceedings;
  • Student loans;
  • Social fund loans; and
  • Some benefit and tax credits overpayments.

The types of unsecured debts that are written off include:

  • Credit cards;
  • Loans;
  • Overdrafts;
  • Store cards; and
  • Council tax.

What would I lose if I entered bankruptcy proceedings?

You would have to surrender all of your valuable assets to a Trustee and under bankruptcy legislation the Trustee would then be permitted to release any available equity from them.

Provided they were not valuable, you would be allowed to keep items that were necessary for work, for example, books or a vehicle. Your Trustee will advise you on the assets that would need to be sold.

A Trustee in a bankruptcy will be interested in assets such as:

  • Any equity in your property
  • Savings, including shares, premium bonds or endowments
  • A vehicle with a high value. However, you may be permitted to buy a more modest vehicle at a lower cost
  • Any money from surplus income

It’s important to note that bankruptcy can mean losing all your valuable assets (including your home) to release equity in order to distribute it amongst your creditors.

What happens to my belongings?

Your Trustee will refer to your belongings as assets.  You will be allowed to keep certain assets including:

  • Everyday household contents;
  • The benefit of a residential tenancy;
  • A modestly priced motor vehicle;
  • Any tools you need to carry out your trade; and
  • Money held in a HMRC approved pension fund.

A Trustee in a Bankruptcy has a duty to obtain a value for assets such as:

  • Any equity in your property; or
  • Savings, including shares, premium bonds or endowments; or
  • A vehicle with a high value. However, you may be permitted to buy a more modest vehicle at a lower cost.

To obtain value for the above assets, your Trustee will discuss the options available to you.  For example, a third party, such as a family member, could pay an equivalent amount to the Trustee to avoid the asset being sold.

If you come into any money during the Bankruptcy, for example an inheritance or a lottery win, that money has to be paid to your Trustee.

It’s important to note that Bankruptcy could result in you no longer owning your valuable assets, including your home if your beneficial interest cannot be released without a sale.  See the below question for further information.

Who will know that I am bankrupt?

People could become aware of you being bankrupt in a number of ways:

  • Bankruptcy Orders are advertised in a publication called the London Gazette. Most banks, building societies and other financial institutions subscribe but it is not usually bought by members of the public;
  • Your details will be held on the Individual Insolvency Register which can be viewed online;
  • Your Bankruptcy may be advertised in your local paper;
  • Credit referencing agencies will be aware of your Bankruptcy, which will make getting credit difficult once you have been declared bankrupt; and
  • If you own a property, the Land Registry will detail the Bankruptcy.

Will I lose my home?

If you rent your home, you should seek specialised housing advice.  It is unlikely that you will lose your home, however there are certain circumstances in which it could be at risk, such as:

  • If your tenancy agreement says a bankrupt person cannot live in the property; or
  • If there are rent arrears or other grounds for possession.

If you own your home, whether it is freehold or leasehold, or whether you own it on your own or jointly with somebody else, your Trustee may want to sell it.

In advance of proceeding with a sale, the Trustee would assess whether it is likely that there would be any sale proceeds left over after paying the mortgage or other secured lender and other costs of the sale.  This remaining balance would go into the Bankruptcy in order to pay your creditors.

The sale of the home may be delayed by a year, if you have family or dependents living in your home, in order to give you time to make other living arrangements.

The sale of the home will not happen in a number of situations:

  • A partner, spouse, relative or friend could buy your beneficial interest. Your beneficial interest is the amount calculated by deducting the mortgage(s) and any other secured balance(s) from the market value. If you own your home by yourself this amount is your beneficial interest, however if you own your home jointly, your beneficial interest is your share of this amount after it has been shared equally with the other owner(s); or
  • If the Trustee has not dealt with your home within 3 years; or
  • If your home has negative equity.

Will being bankrupt mean I could lose my job?

Being declared bankrupt may affect your current employment and chances of gaining employment in the future. If you are a member of a professional body, you may lose your membership. If you work for a financial institution, such as a Bank, then your contract of employment may be terminated as result of your Bankruptcy. You should check your terms of employment for further information before proceeding with Bankruptcy.

Bankruptcy also disqualifies you from holding public office and civil service positions, as well as being the director of a limited company.

What will happen to my bank accounts?

Once you have been declared bankrupt, your Bank or Building Society will freeze your bank account.  This means you will not be able to access any funds in the account and any scheduled payments in such as a wages, and any payments out such as direct debits, will not be made.

If there any funds in the account, your Trustee will decide if you need these funds for living expenses and may instruct the Bank to release these to you.  The Bank will then decide whether to allow the account to be used again, or whether to close it.

If you have a joint account the Trustee will decide how much to release to the other account holder.

Can I open a new bank account?

Yes, however you may struggle to obtain a credit account if you have been declared bankrupt.

In advance of proceeding with Bankruptcy, you should open a basic bank account for use going forward.

How do I contact you?

Take the first step to turning your debt around. By completing our online enquiry form, we will advise whether we can help you with a debt solution and arrange a time to contact you to talk through the options.