Top 5 Bankruptcy Myths
Updated for 2026
If you have been struggling with debt and looking for a way out, bankruptcy might have crossed your mind. But there is a lot of misinformation out there, and it can be hard to separate fact from fiction. In this guide, we break down five of the most common bankruptcy myths so you can make a more informed decision about your finances.
What is bankruptcy?
Bankruptcy is a legal process that can give you a fresh start if you are unable to repay your debts. You can apply for your own bankruptcy regardless of how much you owe. If a creditor wants to make you bankrupt, your debt must exceed £5,000.
Applying for bankruptcy costs £680. Once you are declared bankrupt, an official receiver or insolvency practitioner will look at your finances. Some of your assets may be sold and the money shared between your creditors.
After 12 months, your bankruptcy will usually be discharged, meaning you are released from most of the debts included in it, provided you have met the conditions set out by the official receiver.
If you are weighing up your options, our guide on IVA vs bankruptcy can help you compare the two.
Myth 1: everyone will find out I went bankrupt
When you are made bankrupt, it does become public information. Your details will appear on two government registers: the Gazette and the Individual Insolvency Register.
That said, unless your case is high profile, it is very unlikely that your bankruptcy will be reported in local newspapers or online media. Someone would need to actively search for your name on these registers to find out, and most people simply do not do that.
Your bankruptcy entry is also removed from the Individual Insolvency Register once you are discharged, which is typically after 12 months.
Myth 2: you will definitely lose your job
This is one of the biggest concerns people have, and understandably so. The good news is that for the vast majority of jobs, bankruptcy will not affect your employment.
There are some exceptions. If you work in financial services, law enforcement, or certain regulated professions, your role could be affected. You might not lose your job outright, but your duties could change. It is worth reading through your employment contract carefully to understand any restrictions.
In most cases, you are not legally required to tell your employer. If you are unsure, speak to your employer or seek independent advice. If your employer does take action against you, make sure it is lawful. You may be able to challenge any unfair dismissal.
For more on what to expect before filing, take a look at our guide to 5 things to know before declaring bankruptcy.
Myth 3: you will lose everything you own
This is probably the most common myth of all. Going bankrupt does not mean you will lose every possession.
Certain items are protected. You are allowed to keep:
- Household essentials like furniture, bedding, and kitchen appliances
- Clothing and personal items for you and your family
- Tools of the trade, which are items you need for work, such as a vehicle, books, or equipment
Your home could be at risk if you own property, but even then there are protections in place. The official receiver will consider your circumstances, and in some cases your interest in the property may be dealt with after the bankruptcy period ends.
If your main concern is protecting your assets, it is worth comparing your options. A different approach to managing your debt might suit your situation better.
Myth 4: you will never be able to get credit again
Bankruptcy does have a significant impact on your credit file, but it is not permanent. Your bankruptcy will stay on your credit report for six years from the date of the order. During that time, you may find it harder to access credit, and some lenders will decline your applications.
However, there are steps you can take to rebuild your credit score over time:
- Make sure you are on the electoral register
- Pay all bills and commitments on time
- Consider a credit builder card and use it responsibly
- Check your credit report regularly for errors
Many people are surprised at how quickly their score can improve once the bankruptcy is discharged. For more practical tips, read our guide on common causes of a decreased credit score and how to avoid them.
Myth 5: bankruptcy wipes out every type of debt
Most unsecured debts are included in bankruptcy and will be written off when you are discharged. These include things like credit cards, personal loans, council tax arrears, and utility bill debts.
But not all debts are covered. The following types of debt will survive your bankruptcy, and you will still be responsible for paying them:
- Student loans
- Court fines
- Child maintenance and family court orders
- Debts obtained through fraud
- Personal injury compensation
- Any debts you take on after the bankruptcy order is made
If you are unsure which of your debts could be included, our guide to which debts can be included in debt solutions is a good starting point.
Is bankruptcy the right option for you?
Bankruptcy is a serious step, but for some people it is the best route to becoming debt free. It is not the only option, though. Depending on your circumstances, an IVA, a Debt Relief Order, or a debt management plan might be more suitable.
The most important thing is to get proper advice before making any decision. Swift Debt Help can talk you through your options and help you find the right path forward.
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Disclaimer: This article is for general information purposes only and does not constitute financial advice. Financial information entered must be accurate and would require verification. Your individual circumstances will influence the most suitable debt solution for you.
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