How often can someone file for bankruptcy?

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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 number 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.

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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.

What is a Bankruptcy Restrictions Order (BRO)?

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

Bankruptcy is only one way to deal with debt, and it isn’t the right solution for everyone. While it can provide a fresh start, it can also have lasting effects on your finances, credit rating and future borrowing. Depending on your circumstances, there may be another debt solution that’s better suited to your needs.

Explore your debt solution options

Get help before your debt gets worse

If you’re worried about your debts, or you’ve been bankrupt before and are struggling financially again, it’s important to get free, impartial debt advice before making a decision. Our experienced advisors can explain all of the options available, answer your questions and help you find the solution that’s right for you.

Get free debt advice online or call 0800 316 1833 to speak to one of our experienced advisors.

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FAQs

What if my bankruptcy has ended but I have no proof?

You can ask the Insolvency Service for a free letter to prove you are no longer bankrupt. It is a good idea to keep this letter safe. You can show it to the people you owed money to if they ever ask you for payments in the future

How do I know my bankruptcy has ended?

If everything goes to plan, your bankruptcy will end automatically. You might not get a letter to tell you this has happened. If you are unsure, you can look at the public Insolvency Register online to get an idea of when it finishes.

Who informs my creditors of my bankruptcy?

Once approved for bankruptcy, you will stop dealing with the creditors included in your bankruptcy, and making payments, and they will be unable to take any legal action against you. You will be assigned a Trustee to contact the creditors during your bankruptcy on your behalf.

Can I continue to apply for credit while I am bankrupt?

It is illegal to apply for £500 or more of credit while you are bankrupt without informing the lender that you are bankrupt. In any case, most creditors would run a credit check on you and discover the note on your credit file, which lasts for six years following the date you filed for bankruptcy. We would, therefore, not recommend applying for credit until your file is clear as if you’re refused credit, this can have an additional negative effect on your credit rating.

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:

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.