Bankruptcy is a type of insolvency giving you a fresh start from overwhelming debts in normally 12 months.
Legal Advice on Bankruptcy If needed, we can help by introducing you to specialist insolvency solicitors who can advise on specific matters or concerns you have relating to bankruptcy.
Important: Bankruptcy should only be considered in extreme circumstances after you’ve taken professional advice and explored all other options.
What happens if I decide to go bankrupt?
Applications for self bankruptcy are made online. This is done via the Insolvency Service and does not involve a Court hearing nor a Judge.
An adjudicator is appointed by the Insolvency Service to decides if you should be made bankrupt. If so, a civil servant called “the official receiver” is instructed to administer the process. They’ll look at your financial and personal circumstances (your debts, assets, income and outgoings) to decide how much, if anything, you can afford to contribute towards the debts.
Debt freedom in 12 months
Most people are discharged from bankruptcy after 12 months at which point all included debts are written off.
However, if you can afford it, you will be expected to make some contribution towards the bankruptcy for up to 36 months.
A chat with one of our insolvency team will help you understand bankruptcy better.
A definite outcome
Once you are discharged from bankruptcy, all your unsecured debts are written off, giving you a fresh start.*
Pay back what you can afford
Depending on your circumstances, some debt will usually be written off in bankruptcy.
Creditor protection – no more letters or phone calls.
The Official Receiver deals with all creditor correspondence and any payments due to them.
Less stigma as it becomes more commonplace
Many people per week are made bankrupt in England and Wales; and it no longer involves the courts
*Some debts cannot be included in bankruptcy, such as court fines, child maintenance arrears and secured debts. Secured creditors can still take action against you.
While there are benefits to becoming bankrupt, there are also important considerations you must take into account.
Any business you have will almost certainly be closed down.
You may not be, or act as, a company director or be involved in the management of a limited company without permission from the Court.
Bankruptcy can affect your employment. In some jobs, a record of bankruptcy may lead to dismissal, demotion or other issues.
Some professional membership bodies don’t allow undischarged bankrupts to remain members.
Some jobs are not open to bankrupt people at all.
You can’t do any of the following jobs while bankrupt
- Charity trustee;
- Company director;
- Insolvency Practitioner;
- Justice of the Peace;
If you work in the following industries, you should check whether bankruptcy will have any impact on your job:
- Armed forces
- Anything cash handling, for example banking, payroll or security;
- Financial services, for example accountant, mortgage broker, stock broker or financial advisor;
- Law, for example solicitor or legal executive;
- Medicine, for example GP or dentist;
- Property, for example estate agent, letting agent;
- Pub licensee;
You will be committing an offence if you get credit of £500 or more without disclosing that you are bankrupt (this applied whether obtaining personal debt or debt for business purposes).
Entering into a Bankruptcy has a negative impact on your credit rating for 6 years, which is how long information is retained by the credit reference agencies.
When applying for a mortgage you may be asked if you have ever been made bankrupt.
If it is considered that your behaviour has been dishonest; or irresponsible or reckless and this has contributed to, or to the extent of, of your bankruptcy then the Official Receiver may seek to get a bankruptcy restriction order placed on you.
This can extend the normal bankruptcy restrictions by up to 15 years.
While bankrupt; you are expected to live within reasonable means.
The Official Receiver’s expenditure guidelines can be strict. The following are examples of expenses which are likely to be disallowed (unless there are special circumstances):-
- Gym membership, any sports expenses or club membership
- Private healthcare insurance
- Money for gambling
- Alcohol or cigarettes
- Satellite TV
You can lose assets of value including your home.
Your assets can be sold by your Trustee to raise money to pay creditors, although there are some exceptions to this, including:-
- Household items essential for basic domestic needs – clothes, furniture, TV etc.
- You will be allowed to keep a vehicle if it is needed for the work or to meet basic domestic needs where alternative transport is not practical, but if the vehicle is valuable then it may be sold and you will be allowed an allowance of £1,000 to buy a replacement.
- Items needed for trade or employment, such as tools and computing equipment.
- Money held in pension funds (other than where you have made what your trustee considers to be “excessive contributions” into a pension).
- Money obtained from a student loan, if a balance of the loan remains payable.
When running a business you must disclose the name in which they were adjudged bankrupt to all those they deal with.