Bankruptcy is a solution people turn to when looking to discharge their debts. It usually lasts for a year, depending on the specifics of the case. Bankruptcy laws dictate that an individual can file an infinite amount of times. Having said this, the more someone goes through the bankruptcy procedure, the less likely they are to be granted credit; so theoretically, the less likely they’ll need to file again.

The consequences of bankruptcy

One benefit of bankruptcy is the distance it puts between you and your creditor(s); they will have to stop contact and court action procedures following a bankruptcy order. Furthermore, once you have been made bankrupt, you will be discharged from the majority of your unsecured debts. The extent of which will depend on your situation.

It is unlikely that bankruptcy will discharge you from secured debts such as your mortgage. Furthermore, it’s possible that your home and vehicle will be at risk in bankruptcy and they may be sold to pay your creditors. While the initial benefits and the prospect of a fresh start may seem inviting, the long-term repercussions of bankruptcy are undeniable.

One of the most significant long-term effects of bankruptcy is the detrimental effect it will have on your credit score. Bankruptcy will appear on credit file for 6 years, which may restrict you from obtaining credit in the future. This is problematic, as rebuilding your credit score post-bankruptcy is vital.

For more information on the effects of bankruptcy, click here.

Rebuilding your credit post-bankruptcy

After the bankruptcy ends, you may find it difficult to get credit, as lenders may see you as a high-risk customer. There are many ways you can rebuild your credit rating, such as: joining the electoral roll, keeping up with your repayments to any existing credit, and using a credit card and immediately repaying it.

Whilst trying to rebuild your credit score however, it’s important to spend within your means, and not fall into the same traps that landed you in trouble to begin with.


The Enterprise Act of 2002 made changes to bankruptcy laws. From now on, if you break bankruptcy laws you may have a bankruptcy restriction order (BRO) made against you. A BRO extends the restriction period from the bankruptcy up to a time limit of 15 years.

There are also certain factors you must consider between bankruptcy cases. For example, if you don’t wait 6 years after finishing a bankruptcy from the date you filed, before filing for a new one, this will be noted by an Official Receiver.

Declaring for bankruptcy twice within this time period is not reason enough to make you eligible for a BRO. There are many other factors that may affect an Official Receivers decision to pass such a judgement. Examples of this include:

  • Breaking any agreed upon restrictions placed on you before your bankruptcy has been discharged.
  • Being irresponsible with your money before your discharge (excessive gambling for example).
  • Prioritising paying off some creditors before others in the 2 years before bankruptcy.

There are many other factors that affect an Official Receivers decision, visit the Citizen’s Advice page for a more detailed list.

Alternatives to bankruptcy

The idea of a fresh start is often the reason individuals want to go bankrupt. However, as discussed, the long-term effects of bankruptcy may outweigh the short term gains. If you’re struggling to pay off your debts in time, there are many alternative debt solutions you could be eligible for. To learn more about the debt solutions we offer here at PayPlan, click here.

If you have been through bankruptcy before, and you feel your debt continuing to get out of hand, give us a call today on 0800 316 1833

You can file for bankruptcy any number of times; it doesn’t necessarily mean you should. Other alternatives should always be considered, for FREE debt help and advice, why not contact us here, and speak to one of the UK’s leading debt management specialists.