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Bankruptcy - what you need to know
If you have a debt problem, one of your options for sorting it out might be bankruptcy. You can apply for bankruptcy if you can’t pay back your debts.
As well as applying for bankruptcy yourself, someone else you owe money to (a creditor) can apply to make you bankrupt, even if you don’t want them to. For a creditor to make you bankrupt, you must owe at least £5,000.
Remember, bankruptcy might not be your only option and it might not be the best one for you. One of your other options might be a debt relief order. You could be able to apply for a debt relief order if you have debts, income and property below a certain amount. This is a cheaper alternative to bankruptcy.
Advantages of going bankrupt
When the bankruptcy order is over you can make a fresh start - in many cases this can be after a year. Other advantages of going bankrupt include:
- the pressure is taken off you because you don’t have to deal with your creditors
- you're allowed to keep certain things, like household goods and a reasonable amount to live on
- creditors have to stop most types of court action to get their money back following a bankruptcy order
- the money you owe can usually be written off
Disadvantages of going bankrupt
To apply to go bankrupt you’ll need to pay a £680 fee. Other disadvantages of going bankrupt include:
- if your income is high enough, you’ll be asked to make payments towards your debts for 3 years
- it will be more difficult to take out credit while you're bankrupt and your credit rating will be affected for 6 years
- if you own your home, it might have to be sold (but you may be able to apply to your local authority for re-housing)
- some of your possessions might have to be sold, for example, your car and any luxury items you own
- if you are, or are about to be, the right age to get your pension savings, these might be taken
- some professions don’t let people who have been made bankrupt carry on working
- if you own a business it might be closed down and the assets sold off
- going bankrupt can affect your immigration status
- your bankruptcy will be published publicly (although if you’re worried you or your family maybe the victims of violence, you can ask that your details aren’t given out)
What happens at the end of bankruptcy
Your bankruptcy will normally end after a year. The Official Receiver will tell you when it is over. Most debts that haven’t been paid will be written off although some debts like court fines and student loans can never be written off.
Even when you’re no longer bankrupt, you could have a bankruptcy restriction order made against you. This can last up to 15 years and will restrict your financial affairs. This order could be made if, for example, you do not co-operate with the Official Receiver, or you take on debts knowing that you won’t be able to pay them back.
How to go bankrupt
You can apply to go bankrupt online by filling in a form at gov.uk/apply-for-bankruptcy. It will cost £680.
You won’t get this money back if a bankruptcy order is made.
You can either pay:
- online - you can pay the fee in instalments this way
- by cash at any Royal Bank of Scotland branch - you can’t pay in instalments this way
If you make false statements on the form, or don’t tell the truth about all your property, this is a criminal offence and you could be fined or sent to prison.
If you need help filling in the form, contact your local Citizens Advice or contact the Insolvency Service enquiry line:
Insolvency Service enquiry line
Telephone: 0300 678 0015
Open Monday to Friday, 8am to 5pm
Calls can cost up to 12p a minute from landlines, and between 3p and 45p a minute from mobiles.
Before you apply to go bankrupt, try to make sure you have enough cash for day to day expenses because once a bankruptcy order is made your accounts will usually be frozen.
If your application is accepted and a bankruptcy order is made, your money will come under the control of the Official Receiver. The Official Receiver will arrange an interview with you. After your interview, they will tell your creditors about the bankruptcy and send them a report with a summary of your financial situation. Your assets may be sold to pay off some or all of your debts.
Your name and bankruptcy details will be published on the national register of bankruptcies, called the Individual Insolvency Register.