There are various options available for people looking to break free of debt; one is bankruptcy.

Bankruptcy is a form of insolvency that writes off debts if you struggle to repay them. It’s typically considered a last resort as a suitable legal process if you have little hope of repaying your debts within a reasonable timescale.

Nearly all your unsecured debts are written off when you go bankrupt. In some cases, your creditors can choose to make you bankrupt. However, bankruptcy has severe implications and shouldn’t be considered lightly.

Free and impartial money advice is available from the Money Helper, an organisation set up by the Government for people in debt.

To learn more about managing debt and receiving free, impartial debt advice, visit Money Helper or read about options for paying off your debt



Bankruptcy in the UK is a legal process where an individual’s assets are liquidated and their debts are discharged. This is a last resort for individuals who are unable to repay their debts and is typically considered after other options, such as a debt management plan or an Individual Voluntary Arrangement (IVA), have been exhausted.

To declare bankruptcy in the England and Wales, an individual must make an application to the court and pay a fee. The court will then appoint an official receiver, who will take control of the individual’s assets, sell them to repay creditors, and distribute any remaining funds to the creditors.

Being declared bankrupt can have serious consequences, including the loss of assets, a damaged credit rating, and restrictions on obtaining credit or certain types of employment. However, it may also provide a fresh start for individuals struggling with debt and allow them to move forward with their financial life.

If you declare bankruptcy in the UK, personal assets such as your car and any properties you own will usually be sold to repay your outstanding debts.

As such, if your assets are worth more than your debts, or you can continue to afford to make your debt repayments, personal bankruptcy is not recommended as the best option for you.

Whilst bankruptcy may be a good option for some, there are many restrictions connected with it, such as it being tough for you to get further credit in the future.

Furthermore, debt such as student loans, secured debts, child support and fines are not covered by bankruptcy. Therefore, declaring bankruptcy may still leave you with debts that need to be repaid. Because of these factors and many others, bankruptcy should only be undertaken once you have spoken to a financial expert and all other options have been considered.

The benefits of Bankruptcy:

  • Upon the making of the Bankruptcy Order, apart from a small number of exceptions, creditors can no longer take action against you
  • You will normally be discharged from the bankruptcy order in one year. You wont be expected to make payments if your income is only made up of state benefits such as Universal Credit or Child Benefit.
  • As an Officer of the Court, the Trustee has an overriding duty to act in good faith towards all parties, including the individual who has petitioned for Bankruptcy i.e the Trustee cannot disregard the individuals legal rights, simply to improve the position of the creditors
  • It costs £680 to declare yourself bankrupt and the fee can be paid in installment, but your application cant be processed until the fee is paid in full.
  • Application can be made online, no need to attend court, and can be a very quick.
  • Should you be expected to make payments in to the Bankruptcy, it will last for a period of 3 years

Points to be aware of:

  • If you have disposable income you may have to pay monthly contributions towards your bankruptcy for 3 years
  • Once you are declared Bankrupt, you cannot be employed as a Company Director, be involved in the formation, promotion or management of a limited company, be a magistrate, an MP or Insolvency Practitioner by law. It may also be a term of your employment contract that you cannot go bankrupt, so you may be putting your job at risk. Your employment may be affected and you should consult your employment contract for confirmation of how this will affect you. Your tax code may change, which could alert your employers to the fact that you have gone bankrupt.
  • You cannot obtain credit over £500 without telling the creditor of your status
  • For misconduct during the bankruptcy, such as not informing the Trustee of a change in circumstances, some or all of the restrictions of bankruptcy can be extended beyond discharge by way of Bankruptcy Restriction Order
  • Ownership of all your assets will pass to your Trustee in Bankruptcy, whose main job will be to realise them, such as selling them or releasing equity for the benefit of your creditors. This will include your share of any equity in your home. Whilst your spouse is likely to have rights of occupation, this protection will normally last for only 1 year
  • The term “Assets” is quite wide. It can include, for example, your right to sue for a debt owed to you. Also, the Trustee has the power to apply to Court to overturn prior transactions, subject to various time limits and conditions. Prior Divorce settlements for example can, potentially, come under the scrutiny of the Trustee in Bankruptcy
  • You have little if any influence in what happens
  • Notice of your Bankruptcy will appear on the Insolvency Service Website. It will stay on your credit reference file for 6 years

Free and impartial money advice is available from the Money Helper, an organisation set up by the Government for people in debt.

Below you can view a list of Frequently Asked Questions.

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Frequently Asked Questions

Bankruptcy is just one option to consider when an individual cannot repay their debts. If you are ever faced with Bankruptcy, always look at alternatives as soon as possible such as an Individual Voluntary Arrangement or a Debt Management Plan. Bankruptcy can free you from overwhelming debt to give you a fresh start on your finances. However, it is a serious commitment and should not be considered lightly.

Bankruptcy has two main aims:

  • To free the individual from the pressures of creditors (people they owe money) to enable them to make a fresh start.
  • To ensure that all assets (such as property and investments) are distributed fairly among your creditors.

Anyone can go bankrupt, including individual members of a partnership. There are different insolvency procedures for dealing with companies and for partnerships themselves.

The Courts are officially responsible for making a bankruptcy order against an individual. However, this is usually done at the request of either the individual or one of their creditors.

The assets of the bankrupt individual then fall under the control of a Trustee; this will be either the Official Receiver (a civil servant and officer of the Court) or a licensed Insolvency Practitioner. Whoever is appointed becomes responsible for uncovering the debtor’s assets and liabilities as much as possible and then maximising returns for the creditors from the assets available within specific guidelines.

Once a bankruptcy order has been made against you, your creditors can no longer pursue you for payment. Making a payment to your creditors becomes the responsibility of the Trustee.