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Going Bankrupt

Going Bankrupt

When you have a bankruptcy order, your assets are given to an Official Receiver and they are placed in charge of your finances. While an Official Receiver’s job is to source as much money to pay back your creditors as possible, they are not allowed to take everything and leave you unable to live. They will not, for example, take your entire income to pay back your creditors. They will calculate your essential expenditure, or how much you need to survive, and leave you with this amount for you to budget and live off.

There are some situations under which parts of your property cannot be sold:

  • A car that is essential for your job
  • A car that is essential for caring for a dependent, or for your disability
  • Tools that are essential for your job
  • Clothes
  • Bedding
  • Furniture
  • Household equipment
  • Other belongings necessary for your family’s basic needs

Most other items can be sold, most notably those with value, such as games consoles, technology, and jewellery.

What’s not included in bankruptcy?

Most debts are automatically included in a bankruptcy, and you have very little control over what is and isn’t included. Debts that might not, or wont, be included are:

  • Secured debts, such as mortgages and mortgage arrears – Your bank may decide to repossess your home if you have mortgage arrears and its sale is expected to cover your remaining mortgage. If it does not, you should not be expected to pay the difference as the debt becomes an unsecured debt that can be included in the bankruptcy
  • Fraudulently gained debt – While you will not be expected to pay during your bankruptcy, you are still liable for paying these debts following the end of the bankruptcy
  • Joint debts – It is important to note that if you included these in your bankruptcy, then the other person in the debt will be liable for the whole amount of the debt, not just half. They can also apply for bankruptcy, but you cannot apply for a joint bankruptcy
  • Student debt
  • Magistrates court fines
  • Confiscation order payments
  • Social fund loans
  • Benefits and tax credits overpayments
  • Maintenance payments
  • Child support payments
  • Personal injury or death debts