What is Bankruptcy?

Bankruptcy is a statutory procedure for dealing with your debts which you can start yourself or which one or more of your creditors owed £5,000 or more can start. In either case a Bankruptcy Order will be made declaring you bankrupt and a civil servant, the Official Receiver, will conduct an investigation into your financial affairs.

Assets of value you have may be sold (excluding everyday household items and tools of trade), and the proceeds paid to your creditors and you may be required to make monthly payments from your income for up to three years by way of an Income Payments Order or Income Payments Agreement.

Once the bankruptcy Order is made your unsecured creditors cannot take any further debt recovery action.  You must continue to make payments toward any secured debts such as a mortgage or secured loan on our home or any hire purchase agreements.

Certain legal restrictions are placed on Bankrupts, which include a ban on acting as a company director.

Although you may be required to make payments for three years the actual Bankruptcy Order will normally be discharged after one year, and the restrictions of bankruptcy will no longer apply.

Advantages of bankruptcy

  • Debts are written off, with certain exceptions.
  • Creditors can’t take further action unless the debts are secured on your home or other property.
  • It allows you to make a fresh start after only a year.
  • You may be able to avoid having to sell your home if your spouse, partner or a relative can buy your share of any equity.

Disadvantages of bankruptcy

  • Any assets you own (except essential household items and an essential motor vehicle) will be sold. Your house can also be sold to realise any equity in it.
  • Your bankruptcy is entered on a public register and is advertised.
  • If you apply for your own bankruptcy, you will have to pay fees totalling £680.
  • Any business you have will almost certainly be closed down.
  • Your employment may be affected.
  • Certain professionals are barred from practising if they are made bankrupt.
  • You can’t act as a director of a company or be involved in its management unless the court agrees.
  • You will be committing an offence if you get credit of £500 or more without disclosing that you are bankrupt.
  • You may have a bankruptcy restrictions order made against you for 2 to 15 years if the Official Receiver decides that you acted irresponsibly, recklessly or dishonestly in the period leading up to your bankruptcy.

Bankruptcy Help & Advice

If you are considering bankruptcy, there are other debt solutions available to you. Contact Creditfix to speak with one of our advisers and see what’s best for you and your situation.

Call us now for immediate and confidential free debt advice on 0808 208 5198 or complete the form. We can start to work through our debt problems as soon as you contact us.

Struggling with debt? Call today and find out how we can help.

Bankruptcy Frequently Asked Questions

If you wish to declare yourself Bankrupt you must apply online via the central UK Government website,, to an adjudicator within the Insolvency Service, which is a government department.

Whether you apply for bankruptcy yourself or one of your creditors makes you bankrupt, the process once a Bankruptcy Order is made is the same.

Immediately on the making of the Bankruptcy Order an official called the Official Receiver takes over control of your estate pending the appointment of a trustee. The Official Receiver is an officer of the court and a member of the Insolvency Service. If you have significant assets, an Insolvency Practitioner (IP) will usually be appointed to act as Trustee, either by a meeting of creditors or by the Secretary of State. Where no IP is appointed, or where there is a vacancy in the office of trustee, the Official Receiver acts as Trustee.

All of your assets vest in the Trustee, who has ultimate control over them and can sell them if they can realise money for the benefit of your creditors.

The Official Receiver will ask you to provide information about your debts, creditors, assets and income. You will also receive an information pack that explains what you need to know and what you must do.

You will be asked to fill in a questionnaire and attend an interview with the Official Receiver. The interview can be in person or over the phone.

At the interview, the Official Receiver will check the information they have about your debts and assets, ask for more details they require, eg about your pension or savings, and ask how and why you became bankrupt. They will also answer any questions you have about the bankruptcy process. Your discharge (release) from bankruptcy may be delayed if you don’t provide information you’re asked for.

Your assets (with certain exceptions) are sold to help pay your creditors. However, you can usually keep your personal belongings, the contents of your home and your tools of trade (which may include your car) unless they have a high value.

If you have surplus income after meeting your essential household and personal expenses, you will have to make payments out of your income for up to 3 years.

Bankruptcy usually lasts for 1 year, and once you have been freed (discharged) from your bankruptcy, you are released from your debts (with certain exceptions).

It costs a total of £680 to apply for Bankruptcy yourself.

The fee to submit the online application is £130 and you (or someone on your behalf) must also pay a deposit of £550 to the Official Receiver.

It is possible to pay these fees by instalments online but the Bankruptcy Order will not be made until the £680 has been paid in full.

The Official Receiver or Trustee will take further fees out of any assets that are sold or payments that are made by you through an Income Payments Order or Income Payments Agreement

There are several restrictions placed on you once you are declared bankrupt. You must follow these restrictions, and if you fail to do so it will be a criminal offence, and you could be fined:

• You cannot borrow more than £500 without telling the lender that you are bankrupt
• You are prohibited from acting as a director of a company without permission from the court
• You are not allowed to create, manage or promote a company without the court’s permission
• You can’t manage a business with a different name without telling people you do business with that you are bankrupt
• You are prohibited from working as an insolvency practitioner (an authorised debt specialist)

After 12 months, you will normally be released from your bankruptcy restrictions and debts, however assets that were part of your estate during the bankruptcy period can still be used to pay your debts.

Your bankruptcy will show up on your credit reference file. This would reduce your chances of getting credit if you applied for it, as it would show you've struggled to keep up repayments.

The note will stay on your file for six years from when you become bankrupt, meaning it could be some time before you can get credit in the future. This could make running a business, getting a mortgage, finding a new tenancy or getting any other form of credit extremely difficult for several years.

You might also struggle to open a new bank account after you're declared bankrupt and for some time after you've been discharged from bankruptcy.

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.

If you're unhappy with how bankruptcy might affect your credit rating, you might want to consider a different debt solution.

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