Bankruptcy

Key facts

How much debt must I owe? A creditor can only issue a bankruptcy petition if you owe £5,000 or more. You can make yourself bankrupt however much you owe.

What type of debt? Most types of debts can be included. The main exceptions are student loans, magistrates' court fines, maintenance payments or maintenance arrears ordered by a court, Child Support Agency or Child Maintenance Service arrears, debts you build up through fraud and debts you owe as a result of a personal injury claim against you.

How long will it last? Most people are discharged from all their debts after one year (but there are exceptions to this). If you have spare income you may have to make payments for three years.

How it works

See our fact sheet:

Bankruptcy.

You can apply for your own bankruptcy or a creditor can make you bankrupt. Your financial affairs will be dealt with by the official receiver.

Valuable assets are usually sold to raise money to pay your creditors.

At the end of your bankruptcy most debts are written off. Bankruptcy may be a good option, particularly where you rent your home and have no assets.

Advantages

  • ​It relieves stress and anxiety.
  • It allows you to make a fresh start after a year.
  • Your debts are written off if you have no assets.
  • Most creditors cannot take further action against you unless the debts are secured on your home. There are some exceptions to this.
  • You may need to make monthly payments for a maximum of three years.
  • You may be able to avoid selling your home if your partner or a relative can buy out your share of its value.

Disadvantages

  • Bankruptcy will affect your ability to get further credit.
  • If you have equity you could lose your home.
  • Secured creditors can still take action against you.
  • You have to find the money for the fee and the deposit.
  • Your assets may be sold by the official receiver.
  • Not all your debts are written off.
  • Your employment may be affected. Check your contract.
  • If you run your own business, you may find it difficult to continue to trade.
  • Details of your bankruptcy will be held in the public Individual Insolvency Register and published in the London Gazette.
  • You may have a ‘bankruptcy restrictions order’ made against you for dishonesty or ‘unfit conduct’.
  • In some cases the official receiver can take criminal action against you: for example, if you have committed fraud.