Anyone who is struggling to pay their debts can go bankrupt, but it is a very severe way to achieve financial freedom. Bankruptcy should be seen as a last resort and should only be considered once the alternatives such as a free Debt Management Plan or an IVA has been explored. In order to petition for you own bankruptcy you must be a UK or Welsh resident and can afford the fee of £475. Another factor to consider before going bankrupt is it can affect your employment depending on your job.

Before deciding to go bankrupt you should explore all of your alternatives, including an IVA and a Debt Management Plan. If you make the decision to go bankrupt you should expect to follow the subsequent process.

• Complete the relevant bankruptcy forms (6.27 and statement of affairs)
• Submit the form to your local court
• Pay the fees (usually around £475)
• Meet with an Official Receiver
• Go to court to see a judge (not always necessary)
• Become a bankrupt.

It is important to contact a Payplan adviser to discuss all of your options before beginning the process of bankruptcy.

Recent legislation allows for your automatic discharge from bankruptcy after one year, although most people will remain bankrupt for between six and nine months. Details will, however, remain on your credit file for six years. In certain instances, i.e. where the Official Receiver has not completed his enquiries, where a debtor has not cooperated with him/her or where the debtor is subject to a criminal bankruptcy order, the discharge may be postponed.

The creditors use bankruptcy as a last resort as it usually means they will receive less money than is actually owed to them. Creditors also incur considerable expenses if they petition for a debtor's bankruptcy, much more than the £475 it would cost the debtor.

If you decide to petition for your own bankruptcy, you will need to contact the bankruptcy division of your local County Court or High Court (find your local Court). They will tell you how the bankruptcy process operates through their court and they will provide you with the relevant forms (6.27 and 'the statement of affairs'). These will need to be completed before your petition can be heard.

Ironically, if you wish to petition for your own bankruptcy you have to pay the appropriate fees involved. The court fee is currently £150, administration costs are £345 and, if you go to a High Court a £7 fee is levied for the swearing of the statement of affairs. If you are in receipt of benefits, you may have the £150 court fee paid for you.

The following list shows the restrictions applicable to bankrupts:

• If you apply for credit of £500 or more, you must inform the lender that you are an undischarged bankrupt.
• You can't conduct business directly or indirectly in any name other than that in which you were made bankrupt.
• You can't act as the director of a company or take part in its promotion, formation or management unless you get the court's permission to do so. (You can apply to the court for this.)

You may not act as an insolvency practitioner.

If you are going bankrupt because you are unable to repay your unsecured debts you have the following alternatives, which should be explored before you decide. An IVA, which is legally binding, can allow you to keep your assets and make reduced, affordable, repayments for a specified period (generally five years), after which time the remaining debt is written off.

An informal way of paying your debts is by setting up a free Debt Management Plan (DMP) through Payplan. This system allows you to make reduced payments to your creditors based on what you can afford after your living costs, which lasts until the existing debt is cleared or your circumstances improve.

If the value of your home is greater than the debts secured on it, the Trustee in bankruptcy will look to realise your beneficial interest. This will be achieved by:

• Asking you or your family and/or friends to raise the funds required.
• Asking you to sell your home by placing it on the market or
• Obtaining an order for possession and sale. You must discuss your options with the Official Receiver.

If you live in rented accommodation the Trustee has no interest in the property. As long as you comply with the tenancy agreement you should be able to stay. However the trustee may inform your landlord you are bankrupt.

If you don't have joint debts (a mortgage is considered a joint debt), your partner will not be directly affected by your bankruptcy. If you have joint debts you are both joint and severally liable, so creditors will look to your partner to pay, in full, any debt that was included in your bankruptcy. Details of your bankruptcy will be held by the credit reference agencies and, because you reside together, this could have an adverse effect on your partner. He/she may also be affected by the action taken by the Trustee in respect of your interest in your home.

Details of your bankruptcy are published in the London Gazette and in one newspaper in circulation in your locality. The details are also available online at the public register maintained by the Insolvency Service.

Although you are discharged after a year the bankruptcy entry will remain on your credit file for 6 years. Lenders use your credit file to decide whether or not to lend you money, and these details will obviously affect their decision.

Unfortunately you will have to attend court if you petition for your own bankruptcy. If a creditor presents a petition you may not have to attend the hearing.

There are two types of court which deal with bankruptcies. The High Courts and local County Courts. Under normal circumstances the petition will be heard in the court whose jurisdiction covers the area where you have lived for the better part of the last six months. Search for your local County Court.

Any pension payments received during your bankruptcy will be classed as income and may create a surplus to be paid into the estate under an Income Payment Order/Agreement. Depending on your specific circumstances, you may be able to continue to make payments to your personal pension, although it is unlikely.

Most debts are included in bankruptcy but the following remain collectable:

• Court fines
• Debts due to the Child Support Agency (CSA)
• Student loan debts
• State benefit overpayments
• Secured debts
• Awards for damages and fraud