Check how bankruptcy affects your money and bills

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

When you go bankrupt, you can keep enough money for day-to-day living costs. You can usually keep your pension as well.

If you earn more than you need for day-to-day living costs, you’ll need to pay the rest towards your debts. If you’re not sure, you can check what counts as day-to-day living costs.

The person who deals with your bankruptcy takes control of the rest of your money. They’re called the ‘official receiver’.

This means going bankrupt can affect:

  • your bank account

  • the bills you pay

  • your savings

  • your pension

  • any one-off payments you get, such as an insurance claim or inheritance

  • how you borrow money

Check what happens to your bank account

Once a bankruptcy order is made, any bank or building society accounts you have are usually frozen immediately. This means:

  • the bank might stop payments going into or out of your account

  • you should immediately stop using your debit cards, credit cards and cheque book

  • if the official receiver asks for your debit cards, credit cards or cheque book, you should give them to the official receiver as soon as possible

The official receiver will find out from the bank what is in the account. If they decide that you need the money in the account for necessary living expenses they will tell the bank to release it to you.

The bank will then decide if you can keep using the account. The official receiver is not involved in this decision.

If you can’t use your account any more, you can find out how to open a basic bank account.

If you have a joint account

Your joint bank account will be frozen. The official receiver will usually give half the money to the other account holder.

If the other account holder has paid more into the account than you, they might be able to keep more than half the money. Talk to an adviser if you need to prove someone should keep more than half the money from a joint account.

If you owe a debt to your bank

If you owe the bank money, for example through an overdraft or arrears on a loan, they're entitled to take any money in your account to pay off this debt. This is known as ‘setting off’.

Check what happens to your bills

When you go bankrupt, the official receiver tells your energy, water and phone suppliers. They also tell your local council - this affects your council tax.

What happens to your energy, water and phone bills

Your energy, water and phone suppliers might ask you to supply some kind of financial security, such as a guarantor, a security deposit or a pre-payment meter.

If you want to avoid this, you could transfer the supply accounts into the name of another adult who lives in your home before you apply for bankruptcy.

What happens to your council tax

When you go bankrupt, you won’t have to pay council tax until the next April. April is when your local council’s new financial year starts.

It doesn’t matter which month you go bankrupt - your council tax will start again the April after you go bankrupt.

Check what happens to your savings

If you have savings, these will be used to make payment towards your creditors.

You should get advice if you’re thinking of using your savings before you go bankrupt - for example, if you’re thinking of paying some of your debts or your pension scheme. After you go bankrupt, the official receiver checks how you’ve used your savings. If the official receiver decides you didn’t pay all your creditors fairly, they might give you extra restrictions while you’re bankrupt. You can check the rules about what you did before bankruptcy.

You should also get financial advice about how to make the best use of your savings.

Check what happens to your pension

If you've got one or more pensions, becoming bankrupt may affect your pension rights.

If you could use the money in your pension to pay all your debts, you might not be allowed to go bankrupt.

If you can’t use your pension yet or it doesn’t have enough money to pay all your debts, you can usually keep it. This will depend on:

  • what type of pension it is

  • whether you're receiving an income from your pension yet

  • whether you're planning to receive payments from your pension within 4 years of becoming bankrupt

Check what type of pension you have

Most UK pension schemes are classed as ‘approved’. If your pension is approved, you can keep it.

Your pension scheme is usually approved if it’s:

  • an occupational pension scheme from your employer

  • a personal pension

  • a stakeholder pension

  • a retirement annuity contract

If your pension scheme isn't approved, the official receiver can claim the funds in it as a lump sum of property. This includes if your pension is outside of the UK. You might have options for protecting some or all of it. You should get legal advice.

You might be able to reach an agreement with the official receiver to keep your pension. If you can't reach an agreement you'll need to apply to court for an order to let you keep your pension. The rules are complicated - it's a good idea to get advice before going bankrupt or soon after.​​

If you're not receiving income from your pension

If you're not going to cash in a lump sum or get regular income from your pension within 4 years of becoming bankrupt, the official receiver can’t access any of your pension pot.

If you receive income from your pension

If you get an income from a pension, these payments are treated as income by the official receiver. This means you could be asked to pay some or all of the money towards your debts, if you have more than enough income to cover your day-to-day living costs.

If your only income is from a state pension or other benefits such as pension credits, you won't be asked to pay any of this towards your debts.

You might want to choose not to receive payments from your pension fund in order to stop the official receiver claiming them.

Get advice about bankruptcy and your pension

Pensions are a complex area. Talk to an adviser about how going bankrupt will impact your pension, before you decide to apply.

Check what happens to one-off payments you get after going bankrupt

If you get compensation for something like an injury, you might be able to keep some of the money. Ask the official receiver if you can keep the compensation.

You're highly unlikely to be able to make a claim for an inheritance or insurance - or to keep any money that comes out of a claim. For example, you can’t usually get money for faulty goods, PPI or a loan you shouldn’t have been offered.

This is because any claim you have is counted as an asset. This means it's owned by the official receiver, not by you, and is part of the bankruptcy estate.

If you've already made a claim, you must tell the official receiver. You also have to tell the person or company you're claiming from about your bankruptcy. It's highly likely that any payout will be made directly to the official receiver, and not to you. If it is made to you, you must tell the official receiver.

If you're contacted about compensation by a claims management company, don’t accept their offer straight away. Contact the official receiver, who'll confirm whether or not you're allowed to claim.

If you use a claims management company, you might not get the money you’re awarded, but you might still have to pay the company’s fee.

If you want to get credit or borrow money

While you're bankrupt, you're not allowed to get credit for £500 or more, without telling the creditor about your bankruptcy. Doing this would be committing a criminal offence. You could be fined or even sent to prison. If a bankruptcy restrictions order (BRO) is made against you, this rule will also apply as long as the BRO is in force.

Your bankruptcy will show on your credit reference file. This might make it harder to get a loan. If you get a loan, you might have to pay more fees or interest than before you went bankrupt.

The bankruptcy will stay on your file for 6 years from when you become bankrupt. If you’re still bankrupt after 6 years, it will stay on your file until your bankruptcy ends.

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Page last reviewed on 16 December 2020