Bankruptcy

Key facts

How much debt must I owe? A creditor can only issue a bankruptcy petition if you owe £3,000 or more. You can also make yourself bankrupt if you owe £3,000 or more.

What type of debt? Most debts except: fines, penalties, compensation and forfeiture orders imposed by any court; any debt that has been incurred through fraud; student loans; any obligation to pay maintenance to an ex-spouse due under a court order (not Child Support Agency arrears or Child Maintenance Service arrears); and money owed to a creditor whose debt is secured on your property (such as a mortgage or secured loan).

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 four years.

How it works

See our fact sheet:

Bankruptcy.

You can apply for your own bankruptcy if you are eligible under the ‘minimal asset process (MAP)’ rules, or have a ‘certificate for sequestration’, or are ‘apparently insolvent’. 'Apparent insolvency' is a legal term meaning that you cannot pay your debts as they become due. See our Bankruptcy fact sheet for details. Alternatively, a creditor can make you bankrupt.

The information in this section applies if you go bankrupt on or after 1 April 2015 because you have a certificate for sequestration or are apparently insolvent. If you go bankrupt under the MAP rules, see the section Minimal asset process (MAP) bankruptcy. If you went bankrupt before 1 April 2015, the rules may be different. Contact us for advice.

Your financial affairs will be dealt with by the Accountant in Bankruptcy or a separate insolvency practitioner, called the trustee. Valuable assets are usually sold to pay your creditors.

Your bankruptcy usually lasts one year, but you may have to make payments for four years. When you are discharged (usually after one year) any unpaid debts included in your bankruptcy are written off.

Bankruptcy may be a good option, particularly where you rent your home and have no assets..

Advantages

  • ​Relief from the stress and anxiety of being in debt.
  • Having your debts written off, or ‘discharged’, after one year.
  • Being able to build a new life.

Disadvantages

  • The possible loss of certain assets, particularly your home;
  • The trustee has wide powers over your financial affairs;
  • Certain types of job can be affected.
  • You cannot hold public office (for example, as an MP, MSP, councillor, or member of a school board) and you cannot serve as a company director unless the sheriff court agrees.
  • You cannot take out credit of more than £2,000 unless you tell the creditor about your status.
  • You cannot take out credit of any amount if at that time you have debts of at least £1,000.
  • The bankruptcy will be listed on your credit reference file for six years. Even after this period it can still be difficult to get credit, such as a mortgage. This is because lenders may ask whether you have ever been bankrupt.