Avoiding creditors making you bankrupt

This advice applies to England. See advice for See advice for Northern Ireland, See advice for Scotland, See advice for Wales

If you're worried the people you owe money to might try to make you bankrupt, or a creditor has threatened you with bankruptcy, you should take action to deal with your debts straight away.

This page explains what you can do try to avoid your creditors making you bankrupt.

Top tip

Creditors may sometimes threaten you with bankruptcy at an early stage of your debt problem or where it's clearly inappropriate, for example, where you owe less than £5000. This might be harassment and you can challenge it.

More about harassment by creditors

How to try to avoid your creditors making you bankrupt

If you're behind on payments or owe money, it's important to deal with these debts as early as possible. Don't ignore the problem and hope it will go away. If you've received advice about how bankruptcy would affect you, and you don't want to become bankrupt as a way of dealing with your debts, you might be able to avoid it if you contact the people you owe money to. There may be a different way to deal with your debts.

There are five things you should think about if you think a creditor might try to make you bankrupt:

  • don't ignore a statutory demand

  • check whether you're responsible for the debt you're being chased to pay

  • if you are responsible for the debt, consider whether bankruptcy would be a good way to deal with it and any other debts you owe

  • consider whether another formal debt solution might be the best option for you

  • if you don't want to become bankrupt, speak to your creditor to negotiate a way to pay the debt back, if you decide this is the best option.

Don't ignore a statutory demand

If you've received a statutory demand, there's a strong possibility that your creditor could try to make you bankrupt if you don't take steps to deal with the debt you owe. If you want to avoid being made bankrupt, you shouldn't ignore a statutory demand. There's still time to pay what you owe or come to a payment arrangement with the creditor, but you must act within the timescales set out in the demand.

Are you responsible for the debt?

If you're being chased for debts you don't think you owe, you should contact the creditor as quickly as possible to sort things out. This is called disputing the debt. Some of the reasons why you might think you're not responsible are:

  • you're not the person named on the account

  • you've already paid the debt

  • you disagree with the amount of the debt

  • you think the time limit for recovering the debt has run out.

If you're not responsible for the debt, the creditor should stop chasing you for payment and not start taking steps to make you bankrupt. You may need to get advice to check whether you're definitely responsible for the debt.

  • Check whether you're responsible for a debt.

Considering bankruptcy as an option for dealing with your debts

It might be that bankruptcy would be a good option for dealing with your debt situation. If you get advice about bankruptcy and decide that this is the case, the creditor may apply for you to be made bankrupt if you do nothing.. Sometimes creditors threaten bankruptcy but don’t follow this through. If the creditor does apply for your bankruptcy, you won’t have to pay the application fee. The creditor will do this.

Formal debt solutions

If you can't see a way of being able to pay back what you owe, you might want to consider a formal or informal debt solution. There are several options that you may be able to think about, depending on your circumstances, such as a debt management plan (DMP), debt relief order (DRO) or individual voluntary arrangement (IVA). Choosing a debt solution will have an impact on your credit rating and other aspects of your day-to-day life, but the effects are likely to be less drastic than bankruptcy.

Negotiating with your creditor

If you agree that you're responsible for the debt, but are struggling to pay it back and don't want to become bankrupt or choose another debt solution, you should contact your creditor as soon as possible to discuss options for paying what you owe. This can be difficult, but is often less stressful in the long run. If your creditor doesn't know you're having difficulties paying what you owe, they'll assume you don't want to pay. Most creditors will appreciate it if you contact them to explain the problems you're having.

Find out more about how to deal with creditors.

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