If you’re in severe financial difficulty or have existing unsecured debts that amount to more than you could afford to pay off given your income, then you could help yourself out by declaring bankruptcy.

What is bankruptcy?

Bankruptcy is a legal status for people who’re unable to repay the money they owe and is often the last resort. You can apply for bankruptcy if you have debts over £5,000. However, it’s important to consider other options such as a Debt Relief Order (DRO) or an Individual Voluntary Agreement (IVA) first.

Who can apply for bankruptcy?

You can apply for bankruptcy for one of three reasons:

  • you can’t pay what you owe and want to declare yourself bankrupt.
  • a creditor applys to make you bankrupt because you owe them £5000+.
  • an insolvency practitioner makes you bankrupt because you’ve broken the terms of an individual voluntary arrangement (IVA).

How much does it cost to become bankrupt?

Even if you’re on a low income, the cost of bankruptcy is £680, this is per person, therefore if you’re applying for bankruptcy as a couple, you will have to pay £1360 in total.

Should I declare bankruptcy?

Declaring bankruptcy is quite a severe form of insolvency, given the fact that it is also declared publicly and can result in the loss of almost all of your assets. As such it is not a decision you would take lightly, though those who do declare bankruptcy are often left with little choice.

Other forms of insolvency or debt solution that may be applicable depending on the severity of the debt you are in. These include:

Why consider other options?


In order to raise money to pay off your debts when you’ve declared bankrupt, you will have to sell many of your assets. The trustee appointed to handle your bankruptcy case will take care of all of this.

You will however, be able to keep certain assets including any possessions you need for work. This includes vehicles or any tools, as well as basic household items like furniture, bedding and clothes.

Selling of vehicle

If you have any vehicles such as a car, motorbike or van etc, Your motor vehicle will go up for sale to pay for your bankruptcy debts, unless you need it:

  • for your work or vocation (eg, if you are the main carer for a disabled relative)
  • to meet basic domestic needs where alternative transport is not practical

If the official receiver agrees you need the vehicle, it will be ‘exempt’ and not included in your bankruptcy. This does not apply if you own your vehicle through an ongoing hire purchase agreement (see ‘vehicles under finance agreement’).

If your vehicle is exempt but valuable, you may need to replace it with a cheaper alternative. The official receiver will use the money from the sale to either pay for the new vehicle directly or give you the money to buy one. You must provide proof of purchase for your new vehicle within 1 month. The guide price for a replacement is £1,000.

Closure of bank account

When the bankruptcy order goes ahead, you must:

  • make sure you don’t use your bank account
  • give your cards and cheque books to the trustee

The Bankruptcy will freeze your bank account. Any money in your account will be an asset and claimed by the trustee. The trustee can ask to release some money:

  • for your daily living needs
  • to the other person in a joint account

The bank is also allowed to use money from one of your accounts to pay your debts on another account you hold with them. They may refer to this as a ‘set off’.

Otherwise, money owed to the bank (eg, if you’re overdrawn) is a bankruptcy debt, so you can’t pay this to the bank directly. The exception is if the bank has a charge on your home (security for payment of a loan like a mortgage).

Opening a new bank account

You can open a new bank account after the date of the bankruptcy order but you must tell the bank or building society that you’re bankrupt. Some banks will let you use your old account after they’ve spoken to the trustee.

Work and business

If you’re self-employed, you will need to close your business. The trustee will also claim any business assets.

Your employees may make a claim for unpaid wages and holiday pay, payment in place of notice, and redundancy. They’ll make this claim to the National Insurance Fund.

Bankruptcy can severely affect your current and future employment prospects. Certain industries will not hire anyone made bankrupt to work with them.

Your bankruptcy will be public knowledge.

If you go bankrupt, you can’t keep it private. You need to make sure you understand and are happy with how your bankruptcy may become public knowledge. This may affect your reputation. In addition, when a bankruptcy order put through, the official receiver will tell various organizations and third parties about this. These include:

  • Creditors
  • Bank or building society
  • Energy, water and telephone suppliers
  • Local authority
  • Professional bodies


Furthermore, your trustee may not inform landlord about your bankruptcy unless you’re behind on your rent. The exception to this is if your tenancy isn’t assured, protected or secure. If this applies, the official receiver will contact your landlord to work out whether you gain financially from the tenancy agreement

Advertising your bankruptcy in the newspapers

As well as certain organisations getting informed about your bankruptcy, you will also see an advertisement in the London Gazette.

Details won’t normally be publicly published in a local or national newspaper. This means it’s unlikely that your friends, family or neighbours would find out about your bankruptcy in this way.

The exception to this would be if there has been a high level of public concern or complaint about your financial conduct.

The Insolvency Register

Details of your bankruptcy will be publicly visible in the Insolvency Register. This is a publicly available list of people who are insolvent. Any member of the public can view details of anyone’s bankruptcy by looking at the register.

Can you stop your details from being published?

They can be if there’s a risk that you or your family might be at risk of violence if your address publicly visible. You can apply for a Persons at Risk of Violence (PARV) order. Once you have started your bankruptcy application you can apply for a PARV.

How long will bankruptcy affect my credit file?

Your bankruptcy will appear on your credit report for six years, or until you’re discharged if this takes longer. Lenders look at your credit profile when you apply for credit, so you’ll probably struggle to borrow money while bankrupt. What’s more, you must tell lenders about your bankruptcy when applying to borrow over £500. Employers and landlords may ask to look at your credit information before employing you or letting you rent a property.

Will my bankruptcy affect my spouse and others?

If you’re financially connected to someone, declaring bankruptcy could negatively impact how a lender views them. Examples of a financial connection include joint bank accounts or a shared mortgage. If you’re not connected to someone financially, it shouldn’t affect their credit information – even if you live with them.

Get in touch

If you’d like to learn more about bankruptcy or any other debt management service. Please get in touch. We can discuss your situation and which debt plan would be best for you.

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