Bankruptcy

If you can’t pay your debts and the amount you owe is more than the value of your possessions, you might be able to declare yourself bankrupt.

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What is bankruptcy?

Bankruptcy is a way to deal with debts you can’t pay. You might be able to declare yourself bankrupt if:

you can’t afford to pay back what you owe
the value of your possessions is less than the amount you owe

Bankruptcy involves selling your assets and sharing the money among your creditors. It releases you from most of your debts, usually after 12 months. If you go bankrupt, most of your creditors won’t be able to chase you to pay or take you to court.

Bankruptcy usually lasts 12 months but it stays on your credit file for six years from the date it begins. You’ll probably find it very difficult to borrow during this time. Lenders who are prepared to offer you credit may charge you more, as you’ll be classed as a high-risk customer.

Even after the bankruptcy falls off your credit report, lenders may still ask if you’ve ever been made bankrupt. Mortgage providers are particularly likely to ask this question.

Less than 1% of bankruptcy applications are refused. When you submit your application to the Insolvency Service, they check:

you’ve lived in the country long enough to qualify for bankruptcy
the application was submitted by you and not someone pretending to be you
there are no other current bankruptcy petitions in your name
the debts you want to include haven’t been covered by a previous bankruptcy petition
you aren’t over 55 with a large money purchase pension you could use to pay your debts
you can’t afford to repay your debts

Providing you pass these checks, your bankruptcy petition is highly likely to be accepted.

Most debts can be written off in bankruptcy. There are some exceptions e.g. mortgages (if you want to keep the house), criminal fines and child maintenance arrears. Some of the main debts that can be included in bankruptcy are:

Credit Cards
Buy Now Pay Later
Store Cards
Overdrafts
Personal Loans
Lines of Credit

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If we are unable to help you with all of your debts, or for further information and support to help you with your money troubles, please visit MoneyHelper.

Is bankruptcy right for me?

Bankruptcy might be right for you if you can’t pay your debts and:

the amount you owe is more than the value of your possessions
you can’t see your situation getting any better
it won’t affect future plans e.g. starting a business

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Bankruptcy benefits & things to consider

There’s a lot to think about when you’re considering a DMP. To help you decide if a DMP is right for you, we’ve outlined the main benefits and things to bear in mind:

You can apply to make yourself bankrupt if you can’t pay your debts.

Someone at the Insolvency Service will look at your application and decide whether to accept it.

Bankruptcy usually lasts for 12 months.

When it ends, your outstanding unsecured debt (credit cards, loans, overdrafts etc.) will be written off.

You’ll only be asked to make payments towards your debt if you can really afford to.

Available in England, Wales and Northern Ireland

Your lenders will stop chasing you for payments.

Bankruptcy can seriously affect your credit rating.

We’ll need to check if it’s suitable for you. If not, we’ll suggest other ways to deal with your debt.

You may have to reveal you’ve been made bankrupt when applying for future jobs or credit.

If you own your home, you may have to sell it to help cover what you owe.

You may also have to sell other non-essential items that you own.

It costs £680 in England and Wales and a similar amount in Northern Ireland (the exact amount depends on your situation)

Expert verdict: Bankruptcy gives you protection from bailiffs

Bankruptcy means customers can live without fear of bailiffs and lets them write off unaffordable debt.

Katrina – Debt advice specialist
Money Wellness

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Stages of Bankruptcy

1. Advice

one of our friendly advisers will ask you for all the information they need to assess your situation.

2. Options

They’ll explain your options and help you decide if bankruptcy is right for you.

3. Proposal

If bankruptcy is right for you, we’ll help you with your online application.

4. Set up

If your application is accepted, a bankruptcy order will be made and your lenders will be told.

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Bankruptcy FAQs

The cost of bankruptcy varies slightly depending on where you live in the UK. 

  In England and Wales, it costs: 

£130 for the application fee 
£550 for the bankruptcy deposit

  In Northern Ireland, it costs: 

£151 for the court fee 
£525 for the bankruptcy deposit 
about £7 for the solicitor’s fee

The court fee may be waived in Northern Ireland if you’re on a low income or you get certain benefits. 

You can include some secured debts in your bankruptcy in certain situations. 

  Mortgages and secured loans  

These can be included in your bankruptcy if: 

you give up your house

your house gets repossessed

If you stay in your home, you’ll need to keep paying the mortgage and any loans secured against it. You may lose your home if you don’t. 

Hire purchase and logbook loan agreements 

A finance company will often cancel hire purchase or logbook loan agreements if you go bankrupt. This means you’ll have to hand back the car or other item, but the debt will be included in your bankruptcy.  

If you’re allowed to keep the car or other item, you’ll have to keep making the payments. 

Once you go bankrupt, you may be asked to make payments towards the debts included in your bankruptcy but only if you can really afford to. Your lenders will stop chasing you for payment.   

When your bankruptcy ends, usually after 12 months, any outstanding debt included in your bankruptcy will be written off. 

There are certain rules you’ll have to follow while you’re bankrupt. One of these rules is to co-operate with the official receiver (the person dealing with your bankruptcy). This means making sure you give them any information they ask for etc. 

While you’re bankrupt, you won’t be able to: 

set up a company or act as a director without permission from the court 
do business under a different name without telling everyone you do business with the name under which you were made bankrupt 
borrow £500 or more without telling the lender you’ve been made bankrupt

You could be sent to prison for doing any of things.

Bankruptcy will affect your home in different ways depending on whether you own or rent it. 

Bankruptcy for homeowners 

If you have a mortgage on your home and there’s some equity in the property, you will usually have to sell it. Some of this will go to the official receiver (the person dealing with your bankruptcy) to cover their costs. The rest will be shared between your creditors. 

Bankruptcy for private and social housing tenants 

As long as your rent payments are up to date, you should be able to stay in your home after bankruptcy. 

If you’re behind with your rent, this debt will be included in your bankruptcy. Your landlord won’t be able to take you to court to get their money back, but they may still evict you. This is less likely to happen if you’re a social housing tenant rather than a private tenant.

Most jobs aren’t affected if you go bankrupt. But there are some exceptions, so it’s important to check before you go ahead. 

In some jobs, bankruptcy may result in demotion or even being dismissed. Also, some professional or licensing bodies won’t allow you to renew your membership if you’ve been made bankrupt. 

You should check if bankruptcy will affect your job if you work: 

in a role that requires you to handle cash 
for the police 
for the armed forces

in financial services 
in medicine 
in law 
in property (e.g. an estate agent) 
as a pub licensee

in security 
as a sole trader or in a partnership

It can be tricky getting a mortgage even with a great credit score. If you’ve been made bankrupt, you’ll find it even harder. But it is possible. 

Your bankruptcy will stay on your credit report for six years from the date it started. It will probably be very difficult to get a mortgage during that time. You may be able to get a mortgage from a specialist lender, but this is likely to be an expensive option. 

Even after the bankruptcy falls off your credit file, mortgage lenders may still ask if you’ve ever been made bankrupt. This can affect the likelihood of your application being approved. 

The best way to improve your chances of getting a mortgage is to work on boosting your credit score. Borrowing small amounts and paying it off regularly and on time will help with this.  

It may also help if you: 

can offer a large deposit

are prepared to accept higher-than-average interest rates during the early stages of your mortgage

The more time that passes after your bankruptcy, the better your chances of getting a mortgage – providing you use credit wisely during that time. It’s all about demonstrating to lenders that you no longer pose a high risk. 

When you’re made bankrupt, your details will be added to the public insolvency register. They will stay on there until three months after your bankruptcy ends.   

You can ask to have your address removed from the register if publishing it puts you at risk of violence.

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A wide range of debt solutions and services

Bankruptcy is a big step and one that shouldn’t be taken lightly. It may be that another debt solution is more suitable. We’ll make sure we recommend the best option for your individual circumstances and your long-term financial wellbeing.

You can find more information below on alternatives to bankruptcy.