Bankruptcy

Bankruptcy is a well-established option for people with substantial debt and little or no disposable income to pay creditors. It’s usually seen as a last resort, considered when other solutions aren’t suitable. Our team will discuss your eligibility and what it would mean for you, and point you to the organisations that handle the process.

What happens when you become bankrupt?

Over time, most or all of your unsecured debts are written off (some debts, such as secured loans and student loans, fall outside bankruptcy). In the short term, it stops bill collectors and bailiffs pursuing you for the debts included. For most employees, bankruptcy doesn’t affect their job, but there are exceptions — check your employment contract or speak to HR before applying.

Three steps to bankruptcy

• Apply online via the Insolvency Service at gov.uk, with details of your debts, income and expenditure.
• Pay the fee — currently £680, payable in instalments, with help available in some circumstances.
• Decisions — an adjudicator considers your application and, if appropriate, makes the bankruptcy order. You may be interviewed by the Official Receiver.

Key facts

Bankruptcy carries restrictions: you can’t act as a company director, you must disclose your status when borrowing over £500, and if you own a home with equity the Official Receiver may sell it. It significantly affects your credit rating. If you have disposable income, you may be asked to make payments for three years under an Income Payments Arrangement.

Am I eligible?

• Unsecured debts over £5,000
• Able to meet the £680 fee
• Minimal or no disposable income for debt payments

Free, independent debt advice is also available from MoneyHelper, StepChange, National Debtline and Citizens Advice.