An In-depth Guide to Declaring Bankruptcy in the UK 2021

Bankruptcy may be the right solution for you if you have major debt problems. Declaring bankruptcy in the UK will allow you to waive or write off the debts that have become unmanageable for you.

Like all other debt relief solutions in the UK, bankruptcy has its risks and benefits. Initiating the legal process of declaring bankruptcy may be like a fresh start for some. For others, it could have serious social and financial implications.

Before you make any decision, it is crucial to develop an understanding of what is bankruptcy and how it works.

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What is Bankruptcy?

Bankruptcy is a type of insolvency that helps you deal with debts you cannot afford to pay off within a reasonable period. It is a legal process through which you can write off the debts you have been unable to pay and may involve selling off certain assets (your belongings and property).

Declaring bankruptcy may even be the most suitable solution for you if you own minimal assets, have defaulted on your debt, and are unable to pay your creditors back.

An average bankruptcy in the UK lasts 1 year but it can last longer or less, depending on your case and circumstances.

You can only declare bankruptcy if you are living in England, Wales and Northern Ireland. Those residing in Scotland can apply for sequestration, which is the Scottish equivalent of bankruptcy.

Most people in the UK declare bankruptcy because:

  • It allows them to start anew
  • It helps them write off all the debts they can prove they owe
  • If they have any assets, they can use them to pay off their existing debts

Declaring Bankruptcy in the UK: How Does it Work?

Bankruptcy is a formal procedure whereby you declare that you are unable to reasonably pay your current unsecured debts. In the UK, you can either voluntarily declare bankruptcy yourself or you can be made bankrupt. The latter process is known as involuntary bankruptcy. Involuntary bankruptcy is usually initiated by creditors to whom you owe money they feel there are no other means of recouping.

Once you have declared bankruptcy or have been made bankrupt, you will be under no obligation to respond to your creditors. People you owe money to will not be able to take court action against you and neither will you be required to respond to their phone calls or letters.

Instead, managing correspondence with your creditors and handling your money and assets will become the responsibility of your trustee. This trustee can either be an official receiver appointed by the bankruptcy court or a professional insolvency practitioner.

After the total term of your bankruptcy (usually 1 year) ends, all your existing debts will be written off so you can start afresh. Declaring bankruptcy is a legal procedure; however, it no longer involves going to court.
If you are based in England, Wales and Northern Ireland, you can apply for bankruptcy online. However, if you live in Northern Ireland, you can apply through the High Court.

Debts Included in a Bankruptcy

Some debts that are included in a bankruptcy and written off by the end of it are:

  • Credit Cards
  • Utility Arrears
  • Store Cards
  • Overdrafts
  • Catalogue
  • Benefit Overpayments (If not fraudulent)

Debts Excluded from Bankruptcy

  • Child Maintenance Arrears (if set by CSA or Child Maintenance Service)
  • Criminal Fines
  • Debts you obtain after the date of your bankruptcy order
  • Debts are taken out fraudulently (e-g benefits fraud)
  • Mortgages (if you want to keep the house)
  • Social Fund Loans
  • Student Loans
  • TV Licence Arrears
  • Court Orders telling you to pay compensation for someone’s injury
  • Payments ordered by the court as part of family proceedings (e-g in divorce cases)

What Happens After Declaring Bankruptcy?

After you fill out your application and apply for bankruptcy, an official adjudicator will determine whether to declare you bankrupt or not. You will be informed of their decision within 28 business days.

If your application has been approved, you will be assigned an Official Receiver. This usually happens within two weeks of receiving your bankruptcy order.

The official receiver will review your information and evaluate your:

  • Salary
  • Assets
  • Outgoing expense

This assessment is undertaken to determine how your salary and assets can be used to pay back the money you owe. During this timeframe, your Official Receiver may also request an interview with you to develop a better understanding of your financial circumstances and draft an actionable payment plan.

After you have been appointed an Official Receiver, you will not be responsible for communication with your creditors. To recover the money you owe them, your creditors will be required to file a formal claim to the trustee for the amount owed.

With an Official Receiver (trustee) serving as the intermediary, you cannot make direct payments to your creditors, and neither can they demand direct payments from you.

You will also have to follow ‘bankruptcy restrictions’ until your bankruptcy term elapses and you are discharged. These restrictions are mostly related to taking out more credit. For instance, if you apply for credit of £500 or more, you will have to inform your lender of your bankruptcy.

Taking out credit while having an active bankruptcy order is both expensive and difficult. Having a bankruptcy on your record is also going to poorly affect your credit rating. The bankruptcy is going to stay on your credit file for at least six years.

These are some of the facts you should consider carefully before applying for bankruptcy. It’s better to seek debt help from a debt advisor to work out whether declaring bankruptcy is the best option for you, given your circumstances.

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Bankruptcy Pros and Cons

Just like the rest of the debt solutions, declaring bankruptcy has its own pros and cons. Weighing out its benefits against costs can help you determine whether it is the right option for you.

Depending on your financial situation and amount of debt, declaring bankruptcy can be a blessing for you. Here are some of the advantages of going bankrupt:

Waived Debts
Going bankrupt will reduce your debt load since all the unsecured loans you have defaulted on can usually be written off.

Protection Against Legal Action
Once you secure a bankruptcy order, your insolvency is formally acknowledged. This offers a measure of protection against creditors since they can no longer take any legal action against you to recover the money you owe.

No Additional Charges
Declaring bankruptcy will also stop any additional fees and penalties. This means that your creditors cannot apply further charges and interest payments on you.

Reduced Pressure
After you declare bankruptcy, you will not have to maintain contact with your creditors, and you will stop hearing from them.

The decision to declare bankruptcy should be well-thought-out because it can have serious implications on your life. Here are some of the risks associated with going bankrupt:

Asset Liquidation
Assets such as your home or car might have to be liquidated and sold off in order to pay your creditors.

Professional Limitations
Declaring bankruptcy in the UK may have job-related implications too, especially if you are employed in the legal or financial professions. Some employers do not allow bankrupt individuals to continue working for them.

Impacts Credit File
Having a bankruptcy on your credit file will negatively affect it. Your bankrupt status would show on the credit file for a period of 6 years.

Public Record
Bankruptcy status becomes a matter of public record. Your bankruptcy will be published in a public bankruptcy register.

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Is Bankruptcy Suitable for Me?

It is important to remember that bankruptcy is insolvency so, in debt-related matters, it is considered the last resort in most situations. Declaring bankruptcy can have a significant impact on your financial decisions and lifestyle.

That is why the decision to apply for bankruptcy should never be taken lightly. Here are a few questions to consider before you make up your mind:

  • Debt Level – Does your total debt exceed the value of all your possessions?
  • Time – Have you not been able to repay your existing debts in a reasonable time frame?
  • Alternatives – Do you have some income or savings that you can use to get in a monthly payment scheme like an IVA or DMP?
  • Consistency – Are you certain your circumstances are unlikely to change any time soon?

Bankruptcy should be considered only when you are unable to repay your debts within a reasonable time and you have considered the impact on your personal assets (if you have any).

Declaring bankruptcy may not be the best course of action for you if you can afford to repay your debt in the form of periodic installations or if the total worth of your assets is more than your total debt.

If you are a homeowner, you should consider alternatives to bankruptcy. Homeowners who apply for bankruptcy run the risk of their homes being sold if there is enough equity in them. Tenants who have fallen into rent arrears also run the risk of being legally evicted by their landlords.

In such situations, it may be worthwhile to look at alternatives to bankruptcy before deciding on the perfect debt solution. IVA and Debt Relief Order are two options that may suit you better than bankruptcy.

Because of these considerations, it is crucial that you do not decide to go bankrupt alone. It is highly recommended that you consult a debt specialist before making any decision

Can I Apply for Joint Bankruptcy?

You can apply for joint bankruptcy only if you have a business partner with whom you have taken out debts. You can file a joint application for bankruptcy with your business partner in such a case.

However, joint bankruptcy is not an option for couples. Even if you and your spouse took out a debt that is jointly owned, you will need to apply for bankruptcy individually.

In case of joint debts where both you and your partner are named on the credit agreement, and one of you goes bankrupt, the other person is fully responsible for paying the total debt on their own.

How Much Does It Cost to Go Bankrupt?
In the UK, bankruptcy fees vary nominally depending on where you reside.
In England, Wales and Northern Ireland, you need to pay a total of £680, which includes adjudicator fees worth £130 and official receiver fees amounting to £550.

If you live in Northern Ireland, this breakdown differs slightly. You need to pay a total of £683 out of which £151 is the court fee, £525 is the bankruptcy deposit and £7 is the solicitor’s fee.

Regardless of where you live, you will need to pay bankruptcy fees before you submit your application. If you cannot afford to pay the fees in a lump sum, you may be able to pay them in instalments. Contact the insolvency enquiry line for more information about this.

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How to Apply for Bankruptcy?

Here is a step-by-step breakdown of the bankruptcy process:

  • Get Debt Advice

Since declaring bankruptcy can have a long-lasting impact on your life, make sure you consult a debt advisor and apprise them of your financial condition. Not only will they help you decide whether bankruptcy is the right solution for you, but they can also answer your queries and assist you with your application.

If you are planning on declaring bankruptcy, you should immediately withdraw enough money to meet your living expense for the time being. This is important because if your bankruptcy is approved, your bank account(s) will be frozen.

  • Submit Your Application

To declare bankruptcy, you need to fill out an online application form available on the government website. You will have to provide details of your total debt, your disposable income, and your expense. If you have been approached by debt collectors or bailiffs, you will need to attach copies of any letters you have received from them.

To submit your application, you need to pay a fee of £680 in England, Wales and Northern Ireland and £683 if you are in Northern Ireland.

  • Acceptance and Agreement of Terms

Once your application for bankruptcy is approved, your bank accounts and/or building society accounts will be immediately frozen and an official receiver will be appointed to your case.

Your money and any assets that can be sold to pay back debts will be transferred to your official receiver. They will also be responsible for corresponding with your creditors from this point on.

The details of your insolvency will be included in the UK bankruptcy register, which is basically a public register bearing information of all individual insolvencies to date.

  • Coordinate with Your Official Receiver

At the beginning of your bankruptcy, your official receiver may demand to interview you. You can do this in person or speak to them over the phone.

The receiver serves as a mediator between you and your creditors, so you must engage with them throughout the bankruptcy process. They are responsible for distributing your savings or any returns from the sale of your possessions to your creditors.

Since your existing bank account would be frozen by this time, you will have to open a new bank account for your salaries and living expenses.

  • Discharge

Assuming you cooperate with your official receiver, you will be discharged from your bankruptcy after 12 months. Once this time period passes, all of your remaining debts will be written off. It is wise to request a letter of discharge at this point.

If you have been paying your debts every month, you may have to continue making payments for two more years after your discharge.

What Happens at The End of The Bankruptcy?

Your official receiver will inform you after a year has passed and your bankruptcy has ended. Most of the debts you owe will be written off after this except for student loans and court fines.

It is worth noting that even after your bankruptcy has ended, you could have a bankruptcy restriction order issued against you – such an order can affect your financial decisions for up to 15 years.

This order can be issued for a range of reasons, including noncooperation with your official receiver and taking out more debts that cannot be repaid.

The record of bankruptcy will remain on the bankruptcy register a further three months after you have been discharged – or longer if you have been issued a bankruptcy restriction order.

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Money Advisor is committed to providing the best possible service to all those who need help with their finances. If you are struggling to make ends meet or perhaps have experienced a change in circumstances that have affected your ability to manage your finances, please contact us as soon as possible, we will complete a thorough, impartial examination of your situation and put you on the road to financial recovery.



Need more info? Here are a few of our most frequently asked questions on this topic. If you don’t see the answer you’re looking for here, give us a ring – we’d love to help.

Can I get credit after bankruptcy?

Taking out more debt after you have declared bankruptcy is possible but not advisable. During your bankruptcy term, you cannot borrow more than £500 without disclosing your bankruptcy to the lender. If you are borrowing less than that, you may be able to obtain credit.

Once you are discharged from your bankruptcy, you might find it difficult to take out credit for six more years. Some lenders might let you borrow but at a higher interest rate.

How long will bankruptcy stay on my credit report?

Your bankruptcy will end after a year but it will stay on your credit report for six years after you have been discharged. After this duration, your details will be removed.

Can I be made bankrupt by my creditors?

Yes, if you have borrowed £5000 or more and you break your credit agreement, you can be made bankrupt by your creditors. You will be issued a notification when this happens.

What is the bankruptcy register?

The bankruptcy register is a part of the Individual Insolvency Register, a public register that holds information about different types of insolvencies like bankruptcies, IVAs and DROs.

Can I buy a house after bankruptcy?

You can buy a house after you have been made bankrupt, but it will be more difficult. As a general rule, it is best to wait for two years after you have been discharged before applying for a mortgage. This way, you are more likely to get better interest rates and you also have a chance to improve your credit score.

Can bankruptcy be denied?

Yes. Once you submit your application, an adjudicator will be assigned to your case. They are responsible for deciding whether to approve your bankruptcy application or reject it.

Bankruptcy is usually denied in situations when the adjudicator feels that you can pay back your debts or there is a better solution for your situation.

Will my bankruptcy be public knowledge?

Details of your bankruptcy will be recorded in the individual insolvency register which is a public register.

Will declaring bankruptcy affect my job?

It is highly unlikely that bankruptcy will affect your existing employment but there are exceptions to this rule e-g if you work in the financial industry. You should check you employment contract if you have any concerns.

If you are a business owner, you will need to surrender your business to the trustee, so you will not be able to continue trading with it. You can, however, start a new business but it will be difficult to get credit to help you.

Will going bankrupt write off all my debts?

Most debts are included in your bankruptcy. When you are discharged from your bankruptcy, these debts are written off. However, some debts like child maintenance arrears and court fines are excluded from bankruptcy.

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