Bankruptcy

Declaring bankruptcy is a big decision, one that shouldn’t be taken lightly. There are many consequences to consider, which is why it is important to seek the right level of advice. However, if you have serious levels of unsecured debt and all other options are exhausted, it does protect you from your creditors (the people you owe money to) and it gives you the chance to start afresh.

What could happen if I apply for Bankruptcy?

If you have found yourself in serious debt, bankruptcy offers a chance to make a fresh start and to be protected from people that you owe money to.

Depending on your circumstances, the current cost of going bankrupt in England and Wales is £655. The deposit of £525 towards the costs of administering your bankruptcy and the application fee of £130. For couples, each individual has to pay the fees separately.

What will be the impact of Bankruptcy?

Before you make a decision it’s important that you understand exactly how bankruptcy will affect you.

  • Bankruptcy cannot be done in secret - it’s recorded and the data given to credit reference and other agencies. You should expect that your employer will find out about it. Additionally, if your home is rented, then your landlord is likely to become aware. Details of your bankruptcy are listed on the Insolvency Service website, therefore it is possible that friends or family members may find out about it.
  • You stand to lose any “non-essential” assets other than those which are essential to your domestic needs, tools of the trade, and vehicles that you need in order for you to do your job. The main effect of this is that, if you are a homeowner and there is equity in your property, you will be required to make the equity available. That could include being required to sell your home.
  • If you’re in arrears, the utility providers will be notified of your bankruptcy and you will need to set up a new account. The gas, electricity and telephone contracts may need to be put into the name of another adult that lives with you. If you live alone, you may be required to change these services to a prepayment system.
  • Until you have been discharged from bankruptcy, you will not be permitted to hold certain public offices. You will also not be able to continue as the director of a limited company.
  • You will have a severely limited access to credit until you are discharged from bankruptcy, which could mean that you pay significantly higher rates of interest until your credit rating is restored.
  • Your bankruptcy will not include all of your debts. These include a mortgage and other secured debts, magistrate court fines, debts payable after personal injury claims and debts to a student loans company.
  • If it is determined that you have acted recklessly or dishonestly this could affect the restrictions on your discharge from bankruptcy.
  • Your personal bank account may be affected and could be ‘frozen’ by your bank when they become aware of your bankruptcy order.

How could Bankruptcy benefit me?

There are a number of ways in which bankruptcy can help you.

  • It is a chance to start afresh if you have a substantial debt problem, few assets, and a limited ability to pay your debts.
  • The period over which you pay back your debts will be limited.
  • You will have legal protection with respect to your debts.

If you live elsewhere in the EU, you can’t declare yourself bankrupt in England or Wales. If you live in Scotland or Northern Ireland we recommend you visit:
Scotland
Northern Ireland

How do I begin the process of Bankruptcy?

Bankruptcy applications have moved online and out of the courts. This means that you have to fill in your bankruptcy application online rather than using the old paper form, and you no longer have to go to court. The online application is available on GOV.UK.

Once you've completed your application electronically, an Adjudicator (a government official who works for the Insolvency Service) will make a decision about your application.

The cost of going Bankrupt is £655

  • £130 for considering your application
  • £525 for managing your bankruptcy

You can also make payments online and pay in instalments of as little as £5. However, your application can’t be submitted until the total amount is paid.

If you are a married couple and you are both applying for bankruptcy you’ll both have to pay your own separate fees.

Please note that if your creditors have petitioned for your bankruptcy they may have to pay the fees.

What happens once I have filed for Bankruptcy?

After you have applied for bankruptcy and a bankruptcy order is made, you’ll be assigned an Official Receiver who will help you in the first stages of your bankruptcy. You may be asked to meet with the Official Receiver to determine the full extent of your debts, but also to discuss the reasons for them which may help you to manage better in the future.

Details of your bankruptcy will then be considered. Not all applications result in a bankruptcy order being granted – there are a number of other alternatives, such as the appointment of an Insolvency Practitioner to set up an Individual Voluntary Arrangement (IVA) if it’s determined that it would better suit your circumstances.

If you live elsewhere in the EU, you can’t declare yourself bankrupt in England or Wales. If you live in Scotland or Northern Ireland we recommend you visit:
Scotland
Northern Ireland

What should I consider before I declare Bankruptcy?

The decision to declare yourself bankrupt is a serious matter. It shouldn’t be made lightly, and not without extremely careful consideration and specialist advice.

You should also make sure you've explored all other options available to you - like a Debt Management Plan (DMP), an Individual Voluntary Arrangement (IVA), Re-Mortgage or a Debt Relief Order which may have less of an impact on your current employment and also wont necessarily put your family home at risk.

When is Bankruptcy my best option?

If you have absolutely no other way of negotiating with or paying off your creditors, and they have initiated debt collection activity against you, bankruptcy may be the most appropriate solution.

Always remember that you don’t have to make this decision on your own. There are many people that are there for you, to help ensure that the choice you make is the right one. Try our Debt Solution Finder to find out if bankruptcy could be the best option for you.

How long does Bankruptcy last?

Usually you will be declared bankrupt and subject to restrictions for one year, but you may have to make payments towards your debts for up to three years.

Once your period of bankruptcy is complete all of your debts will be legally wiped and your creditors will be unable to try and collect any more money from you. Details of your bankruptcy will typically remain on your credit file for six years.

Will Bankruptcy affect my employment?

Certain areas of employment will be jeopardized by bankruptcy. Generally those working in a profession or in the financial or legal sectors may find adverse impacts.

Your bankruptcy may also affect you when looking for a new job in the future, as you may be required to disclose your bankruptcy on employment applications. Unfortunately, you may find some employers are hesitant to consider your application.

Might I lose any possessions through Bankruptcy?

It’s different for everybody. You may feel like a huge weight has been lifted from your shoulders, but it’s also natural to worry that bankruptcy may affect your life later on.

For example, finding a bank account may take some time and be very difficult to obtain. It might just be the case that you have to open a savings account first, and then wait a few months before you approach your bank about a current account.

If you want to buy a house after a bankruptcy, you may need to pay a substantial deposit on your mortgage. It’s also likely that you will face higher interest rates as lenders will perceive you to have a higher risk of default.

If you live elsewhere in the EU, you can’t declare yourself bankrupt in England or Wales. If you live in Scotland or Northern Ireland we recommend you visit:
Scotland
Northern Ireland

How much do I have to pay to declare Bankruptcy?

In England and Wales, the cost of declaring bankruptcy totals £655, however this cost is comprised of two separate fees. One of these fees must be paid in every case, whereas the other may be waived under certain circumstances.

In England and Wales, when you apply for bankruptcy, you will have to pay a fee of £525 as a deposit to the Official Receiver, who will be administering your bankruptcy case. A second fee of £130 applies for the cost of considering your application.

How can I pay my fees?

Applicants can pay the bankruptcy fee:
- online by debit and prepaid cards by logging into your application and selecting the 'Make a payment' button
- by cash at any Royal Bank of Scotland branch

You won’t be able to pay these fees using a personal cheque. When paying online you can pay in instalments of as little as £5 if you can’t afford the full amount in one go. However your application will not be processed until the full fees have been received.

Will I have to pay anything towards my debts?

After you have filed for bankruptcy, the Official Receiver will review your debts and decide how much, if any, you will have to pay.

If you do have to pay a contribution, or an ‘income payments arrangement’, this will be paid on a monthly basis for up to three years. You will be liable to make a contribution if you have an available income of more than £20 a month, after you have paid your household bills and essential living costs.

How Much Will I Have to Pay Towards My Debts?

Depending on your circumstances, this can vary, but rest assured that you won’t be asked to pay anything that you cannot afford. You will always be left with enough money to live on each month.

The Official Receiver will help you to generate money to pay your debts through the sale of any valuable property you have, like cars and jewellery, or by using your savings.

If you live elsewhere in the EU, you can’t declare yourself bankrupt in England or Wales. If you live in Scotland or Northern Ireland we recommend you visit:
Scotland
Northern Ireland

How do I apply for Bankruptcy?

Get more information about bankruptcy and other debt solutions by connecting the Money Advice Service.