If in debt and you can’t afford to make payments to your creditors to pay off your balances, then applying for bankruptcy is an option. The decision to go bankrupt is not one that you should take lightly, but it is a viable solution for many people in debt.
A lot of the stigma surrounding bankruptcy has disappeared, but there is a lot to consider before going down that route. If you feel bankruptcy is right for you seek professional help available from an official source.
Bankruptcy Explained

What is bankruptcy?

A form of insolvency for those struggling with debt, Bankruptcy enables you to start fresh and protects you from the people you owe money to.

  • If you own any assets, they may be taken and used to pay off your debts
  • Bankruptcy doesn’t cover mortgages and other secured debts, magistrate court fines, debts payable after personal injury claims and debts to a student loans company.
  • It allows you to make a fresh start

Can I apply for bankruptcy?

There’s no minimum amount of debt for bankruptcy. If the value of your unsecured debt is greater than the value of your belongings, such as property and vehicles, it may be a suitable option for you.

If you don’t have a large amount of debt, there may be other options more suitable for you, such as Individual Voluntary Arrangements (IVA), Debt Management Plans (DMP), Debt Relief Orders (DRO), Administration Order (AO) or even a Remortgage.  If you need help with your debt, then you should speak to the Money Advice Service or Citizens Advice Bureau for free.

For a creditor to bankrupt you, you must owe at least £5,000, but high street lenders rarely use this option as they prefer to find another way to pay off your debts.

Who is bankruptcy suitable for?

If you have no real way of paying off your debts and few assets consider bankruptcy. However if you own a home you should look into other options because bankruptcy puts your home at risk of being sold if there is enough equity.

If, as a tenant you’ve fallen into rent arrears, then your landlord can legally evict you. It’s important you talk to a free debt adviser first; don’t make a decision to go bankrupt alone.

How to apply for bankruptcy?

You can only apply online, it costs £680 in England & Wales, and £647 in Northern Ireland.

PLEASE NOTE: Your name and bankruptcy details are published online on a national register, called the Individual Insolvency Register.

What happens after being declared bankrupt?

Within 2 weeks of the court making you bankrupt you’ll receive a letter from an official receiver; they manage your bankruptcy as an officer of the court.

You should expect the court to ask in the letter to provide more information; this will either be through a questionnaire or an interview. The information requested will include details on your debts, creditors, assets and income. You must comply with the official receiver’s requests and failure to do so could delay your discharge (release) from bankruptcy.

Things to consider:

Here are some points to take into consideration when thinking about applying for Bankruptcy.

  • Bankruptcy may impact your employment; we recommend checking your employment contract, especially within the Civil Service or Financial Services. If you’re concerned about the specifics of your employment contract seek independent advice.
  • Bankruptcy is a formal insolvency procedure, and is a matter of public record.
  • You’ll pay an upfront payment of £680 *England and Wales, (for Northern Ireland £647) in order to access the solution. Further fees are payable and are taken from funds recovered for creditors. You will not be asked to pay anything further; the fees will be taken from any sale proceeds and/or payments you make to your Official Receiver or Trustee.

See the full list here


Want to know more about your options?

Don’t take the decision to go bankrupt lightly. At you won’t find debt advice, but here are some organisations that can help you make an informed decision. If you need help with your debt, you can speak to the Money Advice Service or Citizens Advice Bureau for free.

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“Disclaimer: No information on this website shall be construed as advice and content is offered for information purposes only. You should always seek advice from an appropriately qualified solicitor on any specific legal enquiry, an appropriately qualified Independent Financial Advisor on any specific financial matter, or an appropriately regulated and qualified debt management company. Full terms of use

Debt Free Direct is a trading name of Clear Start Partnerships Limited and is authorised and regulated to issue debt advice by the Financial Conduct Authority.

Simpson Millar LLP Solicitors is a limited liability partnership and is authorised and regulated by the Solicitors Regulation Authority.

© Copyright Simpson Millar Financial Services Ltd (Company No: 08121664). Registered office: 21-27 St Paul's Street, Leeds LS1 2JG. Authorised and Regulated by the Financial Conduct Authority. FCA registration no: 589130.
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