Bankruptcy
What is bankruptcy?
Bankruptcy is a legal process for people who can’t afford to repay their debts.
When you apply for bankruptcy, you’re formally confirming that you can’t repay your debts. A trained person, called a trustee, takes control of your case and decides how your debts and finances will be managed.
In England, Wales, and Northern Ireland, anyone who is struggling with debt can apply for bankruptcy. Bankruptcy is usually seen as a last resort, so it’s important to explore all your options first.
How does bankruptcy work?
If you go bankrupt, a trustee will manage your debts. This is usually an Official Receiver (a government official) or an Insolvency Practitioner.
They will:
- Review your income and spending
- Look at what debts you owe
- Assess any assets you own
You can usually keep items you need for everyday living, such as:
- Clothes
- Basic household items
- Tools or equipment needed for work
If you own valuable items or assets, these may need to be sold to help repay your debts.
Bankruptcy usually lasts for 12 months. After this time, the debts included are written off.
In some cases, if you have extra income after paying for essential living costs, you may be asked to make affordable payments for up to three years.
Assessing your budget and debts
Before bankruptcy is considered, your financial situation will be reviewed in detail.
This includes:
- Your income
- Essential living costs
- Your debts
- Any assets you own
The aim is to understand what you can realistically afford and whether bankruptcy is the right solution.
Am I eligible for bankruptcy?
Bankruptcy may be an option if you can’t afford to repay your debts and are struggling to keep up with repayments.
Is there a minimum or maximum debt allowed in bankruptcy?
There’s no set amount of debt needed for bankruptcy. What matters is whether you can afford to repay what you owe.
How much does bankruptcy cost?
There’s a one-off fee to apply for bankruptcy:
- £680 if you live in England or Wales
- £683 if you live in Northern Ireland
You can usually pay this fee in instalments. In some cases, charities may be able to help with the cost, but you’ll need to apply.
Your bankruptcy application can only be submitted once the full fee has been paid.
What debts can be included in bankruptcy?
Most unsecured debts are included, such as:
- Bank loans
- Overdrafts
- Credit cards
- Payday loans
- Council tax arrears
Some debts aren’t covered by bankruptcy, including:
- Secured debts (like mortgages)
- Court fines
- Student loans
- Child maintenance arrears
You’ll need to continue paying these debts outside of bankruptcy.
What are the benefits and risks of bankruptcy?
Benefits of bankruptcy
- Debt relief: The debts included are written off at the end of bankruptcy.
- Less pressure from lenders: Creditors must stop contacting you or taking legal action.
- Payments only if affordable: You usually only pay if you can afford to do so.
- A clear end date: Bankruptcy normally ends after 12 months.
Risks of bankruptcy
- Your belongings: Valuable items or assets may be sold.
- Your credit file: Bankruptcy stays on your credit record for six years.
- Public record: Your name appears on the Insolvency Register during bankruptcy and for three months after.
- Work and borrowing limits: There may be restrictions on borrowing, running a business or certain jobs.
- Possible income payments: If you can afford to do so you may pay for up to three years. If you only receive state benefits, you won’t be asked to make payments, but you must still pay the application fee.
How do I apply for bankruptcy?
Before choosing bankruptcy, it’s important to get regulated and confidential debt advice. This helps you understand all your options and find the best way forward for your situation.
If bankruptcy is the right option for you:
- Applications in England and Wales are made online through the Insolvency Service.
- If you live in Northern Ireland, the process is different and involves applying through the courts.
If you need extra support, trusted organisations such as Citizens Advice can help guide you through the process.
FAQs
Will bankruptcy affect my ability to get a mortgage?
Yes. Bankruptcy stays on your credit file for six years and can make getting a mortgage more difficult. Some lenders may also ask if you’ve ever been bankrupt, even after it drops off your credit record. You may need to wait, rebuild your credit or save a larger deposit to improve your chances.
Who will find out about my bankruptcy?
Your bankruptcy will appear on the Insolvency Register during the bankruptcy and for three months after. It’s also published in The London Gazette. Most people won’t see this unless they’re specifically looking, but lenders or employers may check.
Can bankruptcy affect my job?
It can, depending on your role. Some professions – such as the Police Force, Armed Forces or certain local government roles – may have restrictions. It’s important to check before applying.
What happens when my bankruptcy ends?
When your bankruptcy ends (usually after 12 months), any debts included are written off, and you’re no longer responsible for them.
Want to know more? We’ve answered some of the most common questions about bankruptcy here.
Let’s talk through your options
Bankruptcy won’t be right for everyone. The best option depends on your personal situation and what you can realistically afford.
You don’t have to figure this out alone. Debt advice is available to help you understand your options and find a way forward.
Get debt help online or call us on 0800 316 1833 for a confidential conversation.
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