Debts that bankruptcy covers
Going bankrupt will mean that you won't be liable for most of your debts and you won't have to pay them. However, bankruptcy doesn't cover all debts so it's important to make sure you know whether any of your debts won't be covered and put plans in place to deal with them.
If you're facing bankruptcy, you'll need expert advice. You can talk to an adviser to get advice about your debt problems and bankruptcy.
Check which debts are included in bankruptcy
Most debts that you have when a bankruptcy order is made will be covered by your bankruptcy. If you become liable for things such as court costs or benefit overpayments because of something that happened before the date of your bankruptcy, any debts that arise will still be included in your bankruptcy order. This includes if you’re asked to pay them after you’re discharged from bankruptcy. This means you won't have to pay them at the end of the bankruptcy period.
However, there are some debts you’ll still need to pay after your bankruptcy period ends. Before you apply for bankruptcy, you should work out if you’ll still need to pay any debts, and how you'll deal with them.
Debts you'll still have to pay
- magistrates court fines
- any payments a court has ordered you to make under a confiscation order, for example, for drug trafficking
- maintenance payments and child support payments, including any lump sum orders and costs that have arisen from family proceedings, although you may be able to ask the court to order that you don't have to pay this debt
- student loans from the Student Loans Company
- debts you owe because of the personal injury or death of another person, although you might be able to ask the court to order that you don't have to pay this debt
- social fund loans
Mortgages and debts secured on your home
You’ll need to keep paying your mortgage and any other debts secured on your home - for example, debts secured with a charging order. If you fall behind with the payments, bankruptcy won't stop your mortgage lender from taking steps to repossess your home.
If you have an income payment agreement (IPA) or income payment order (IPO), tell the official receiver you need to keep paying a secured debt. Ask them if you can pay less under the IPA or IPO so you can keep paying the secured debt as well.
If your home is repossessed and sold, but doesn't raise enough money to pay off your outstanding mortgage or any other debt secured on it, the remaining debt known as 'mortgage shortfall' will no longer be secured. This means you'll be released from it at the end of your bankruptcy. You'll also be released from a mortgage shortfall if your home is sold at any time, even after your bankruptcy has ended.
If you owe money to people or companies in the EU
Bankruptcy might not be right for you if you owe money to people or businesses in the EU. These debts might not be covered by bankruptcy.
Your creditors could keep asking you for money, for example by calling you and sending you letters.
If you live in the EU, they could take you to court in the EU.
EU creditors still have to sue here in the UK rather than abroad in the EU, even if they have an existing judgment. The UK will recognise EU judgements entered or started before 31 December 2020.
If you live in the UK but have a home in the EU with a mortgage from an EU lender, the lender could take you to court in the EU.
Get legal advice if you have creditors in the EU. Find free or affordable legal help.
If you took out any of your debts by fraud, your creditor can't chase you to pay them while you're bankrupt, but you won't be released from them at the end of the bankruptcy period. This means you'll still be liable for paying debts you obtained by fraud after you've been discharged from bankruptcy.
Debts in joint names
If you owe debts jointly with someone else, you can include these in your bankruptcy. However, the creditor would then be able to chase the other person for the whole of the amount that is owed. They can do this whether the person is working or not.
You and the other person can each apply for bankruptcy individually, which would cover the joint debt. You will each need to pay a fee and a deposit separately. You can't jointly apply for bankruptcy.
If someone is a guarantor for a loan you’ve taken out it will be included in your bankruptcy but the other person will still have to pay the debt.
If you are the guarantor and the other person fails to pay, it will be included in your bankruptcy and the creditor won’t be able to chase you for it.
Business debts are covered by bankruptcy. If you have business debts that were taken out in a partnership, you can make a joint application for bankruptcy as long as all the partners agree. If you're thinking about doing this, you should take specialist advice.
Business Debtline (BDL) is a charity which offers free, impartial and confidential advice to businesses in financial difficulty in the UK both on its website and by a helpline.
Freephone: 0800 197 6026 (Monday to Friday from 9.00am to 8.00pm)
If you have rent arrears for your home, they'll be included in a bankruptcy order but your landlord could still take action to evict you. It’s important that you make a plan to pay your rent arrears after bankruptcy if you want to keep your tenancy.
Hire purchase agreements
If you have an income payment agreement (IPA) or income payment order (IPO), contact the official receiver or bankruptcy trustee. They’ll tell you if you can keep making the hire purchase payments.
If you don’t have an IPA or IPO and you want to keep an essential item like household goods or a low value car, you’ll need to make an arrangement with the lender to keep paying for them. The bankruptcy won’t stop the lender from taking action to get the goods back if you stop paying.
Some hire purchase agreements say the lender can take the goods back if you go bankrupt, even if you keep making the payments. If your lender decides to do this, tell them you can still make the payments and ask them to let you keep the agreement. If they don’t agree, they might let a family member or friend make the payments for you.
If the goods have been repossessed already then any debt outstanding will be covered by the bankruptcy.
If you're trying to cut your spending or are having trouble keeping up with payments, see our advice on getting help with bills. Use our budgeting tool to see exactly where your money goes each month.