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.
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
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.
- £680 if you live in England or Wales
- £683 if you live in Northern Ireland
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.
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 (e.g. 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.
We’re here to help
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.
- 100,000+ People received free, confidential debt advice last year
Frequently asked questions
We’ve put together a list of frequently asked questions about bankruptcy and we hope your query can be answered here.
- All of your debts and fees for your bankruptcy have been paid in full by either you or a third party.
- You’ve set up an Individual Voluntary Arrangement (IVA) instead.
- The bankruptcy was set up in error.
Who informs my creditors of my bankruptcy?
Can I continue to apply for credit while I am bankrupt?
Can I cancel bankruptcy?
You can cancel bankruptcy, which would lift the restrictions on you and the impact on your credit rating sooner, but you can only do this if one of the following reasons applies:
How long will my bankruptcy last?
Bankruptcy will normally last for 12 months, after which time your debts are written off at the end of bankruptcy. If you have a surplus income of more than £20 a month, you may also be required to pay into the bankruptcy for up to three years.
You won’t be required to make a payment from your income if you are just in receipt of state benefits.
How much does it cost to file for bankruptcy?
Let’s make your debt more affordable
You’re just two steps away from taking back control of your finances and freeing up more money for you and your family.
Getting advice has no impact on your credit score.
Excellent, professional, friendly and empathetic service. PayPlan have given us our lives back!
Sandra Daly
Excellent, professional, friendly and empathetic service. PayPlan have given us our lives back!
Sandra Daly