Bankruptcy

Sometimes there’s simply no way to repay what you owe in a reasonable time. If your debts are particularly high and / or your income is low, you may need to think about declaring yourself bankrupt. Like an IVA (Individual Voluntary Arrangement), bankruptcy is a form of insolvency: it’s a legal process that will share out your assets fairly among your creditors, protect you from further legal action and upon successful completion (normally after 1 year), write off your outstanding debt allowing you to make a new start.

Is bankruptcy right for me?


While it should be considered very carefully and as a last resort, bankruptcy is the best way out of debt for some people. It all depends on your situation – bankruptcy might be right for you if you:

  • Have a limited disposable income.
  • Don’t think your financial situation will improve in the short to medium term.
  • Can’t repay your debt within a realistic timeframe.
  • Own few assets.
  • Have already considered other debt solutions.

Benefits of bankruptcy


  • A ‘light at the end of the tunnel’ – a date when you know you’ll have repaid your debts.
  • Upon successful completion you’ll have no further liability to your creditors – normally after 12 months.
  • Peace of mind.
  • Protection from creditors.
  • A chance to make a new start when your bankruptcy is over.

What are the drawbacks of bankruptcy?


  • Any valuable assets, including your home, may be sold so the funds can go towards repaying your creditors.
  • You will not be able to work in some professions – as a company director or local government councilor, for example.
  • Your bankruptcy will be advertised in newspapers.
  • Bankruptcy is a formal, court-driven process.
  • Bankruptcy will affect your credit rating for 6 years.

Advantages summary


  • Debts are written off, with certain exceptions explained below.
  • Creditors can’t take further action unless the debts are secured on your home or other property.
  • It allows you to make a fresh start after only a year.
  • You may be able to avoid having to sell your home if your spouse, partner or a relative can buy your share of its value after any debts secured on it have been paid.

Disadvantages summary


  • Your bankruptcy is entered on a public register and is advertised.
  • If you apply to the court for your own bankruptcy, you will have to pay a court fee and deposit totalling £705.
  • You will remain liable to pay certain debts – in particular, student loans, fines, debts arising from family proceedings; and budgeting loans and crisis loans owed to the Social Fund.
  • Any business you have will almost certainly be closed down.
  • Your employment may be affected.
  • Certain professionals are barred from practising if they are made bankrupt.
  • You can’t act as a director of a company or be involved in its management unless the court agrees.
  • You will be committing an offence if you get credit of £500 or more without disclosing that you are bankrupt.
  • You may have a bankruptcy restrictions order* made against you for 2 to 15 years if you acted irresponsibly, recklessly or dishonestly.

How to apply for bankruptcy


You can apply for bankruptcy by filing a petition at the County Court – the district judge will decide whether or not to grant the bankruptcy. You’ll have to pay £700 (£525 Official Receiver’s deposit + £175 court administration fee). If you’re unemployed or on a low income, you may not have to pay the court fee when you apply for bankruptcy. This is called Voluntary bankruptcy. There’s also Involuntary bankruptcy: any of your creditors can petition for your bankruptcy if you owe them £750 or more. Alternatively contact us today and we will assist you in applying for your Bankruptcy Petition.

Fees for Bankruptcy


We do not charge a fee for our bankruptcy advice we can make all the forms available to you and help you book the appointment with the court to file for bankruptcy. Please speak to one of our plain speaking advisers to see if it’s suitable for you. The court and official receiver fees will need to be paid to the relevant authorities.