Bankruptcy

Bankruptcy

Bankruptcy is a formal insolvency procedure. You can apply to go bankrupt if you can demonstrate that either your debts exceed your assets or you are unable to pay your debts when they are due. There is no restriction on the level of debt you must have to apply.

We do not offer assistance in petitioning for bankruptcy because you can apply online through the central government website, GOV.UK. You'll receive your decision online, usually within 28 days and, if your bankruptcy is approved, you'll be contacted by the Official Receiver who will oversee your bankruptcy and will want to know about your financial history.

If you have surplus income after meeting your essential household and personal expenses, you will have to make payments out of your income for up to 3 years.

In addition, you will have to hand over any assets you have to the trustee in bankruptcy to be sold to repay your creditors. This does not include everyday items you need for your reasonable domestic needs but is likely to include your house if it can be sold for more than the mortgage outstanding.

Bankruptcy usually lasts for 1 year, and once you have been freed (discharged) from your bankruptcy, you are released from your debts (with certain exceptions).

Advantages

  • Debts are written off at the end of one year.
  • Creditors can’t take further action unless the debts are secured on your home or other property.
  • It allows you to make a fresh start after only a year.
  • You may be able to avoid having to sell your home if your spouse, partner or a relative can buy your share of its value after any debts secured on it have been paid.
  • You can apply online and pay in instalments

Disadvantages

  • Your bankruptcy is entered on a public register
  • If you apply for your own bankruptcy, you will have to pay an adjudicators fee and deposit totalling £680
  • You will remain liable to pay certain debts – in particular:
    • student loans;
    • fines;
    • debts arising from family proceedings; and
    • budgeting loans and crisis loans owed to the Social Fund
  • If your situation changes for the better you will be expected to pay more to your creditors
  • Your employment may be affected
  • Certain agreements such as hire purchase agreements and mobile phone contracts may come to an end
  • You can’t act as a director of a company or be involved in its management unless the court agrees
  • You will be committing an offence if you get credit of £500 or more without disclosing that you are bankrupt
  • You may have a bankruptcy restrictions order made against you for 2 to 15 years if you acted irresponsibly, recklessly or dishonestly