Bankruptcy

What is bankruptcy?

Bankruptcy is a legal process that allows individuals or businesses to eliminate or repay their debts. 

When you go bankrupt, your assets may be used to pay off your debts. After a period, typically one year, most of your outstanding debts are written off, which can help you make a fresh start. 

You can apply for bankruptcy yourself, or a creditor can initiate the process to make you bankrupt, though it is rare for creditors to do so.

How to declare bankruptcy yourself

You can apply for bankruptcy online at www.gov.uk/bankruptcy. The application fee is currently £680. 

Once submitted, your application goes to the adjudicator at the Insolvency Service, who will decide whether to issue a bankruptcy order within 28 days.

What happens if I go bankrupt?

When you declare bankruptcy, an official receiver is appointed to manage the process. 

The official receiver will assess your income and expenses to determine if you have any surplus income after covering essential living costs, such as your mortgage, rent, household bills, and food. If you have spare income exceeding £20 per month, you will typically be required to contribute that amount to your bankruptcy for three years.

The official receiver may sell some of your assets to generate funds to pay your debts, but you are allowed to keep enough money for daily living expenses.

Impact of bankruptcy on your life

Going bankrupt can have various effects on your life, including:

• You will usually need to close your bank or building society account upon declaring bankruptcy. However, most high street banks allow you to open a basic bank account.
• It may become challenging to obtain credit even after the bankruptcy order has expired.

Duration of bankruptcy

Most bankruptcy orders last for one year. But will last 6 years on your credit file.