What is Bankruptcy?
Bankruptcy is a formal insolvency route for individuals with unsecured debts that they cannot pay. Bankruptcy is often the last resort and can be used when no other alternative is suitable.
Once you are made bankrupt you have a duty to provide information to the official receiver and the trustee, and attend their office as and when required.
Who can apply for Bankruptcy?
If you live in England, Wales or Northern Ireland you can apply for bankruptcy if you have debts over £5,000.
England and Wales
If you live in England or Wales you can make yourself bankrupt by submitting an online application and paying the bankruptcy fees. https://www.gov.uk/apply-for-bankruptcy
Northern Ireland
If you live in Northern Ireland you need to apply to the court. https://www.nidirect.gov.uk/articles/bankruptcy
Bankruptcy costs and fees will vary depending on the country you live in. Below we look at England, Wales & Northern Ireland.
In England and Wales:
- the application fee is £130 and
- the bankruptcy deposit is £550
In Northern Ireland:
- the court fee is £137,
- the bankruptcy deposit is £525,
- and there is a fee of £7 payable to a solicitor before whom you swear the contents of your statement of affairs
Advantages of Bankruptcy
- It includes all unsecured debt.
- Interest is frozen (unless debts are repaid in full, then you may have to pay statutory interest).
- And at the end of the year, any debts outstanding will be written off and no further action can be taken by creditors to recover it or contact you.
- For a lot of people, bankruptcy is the quickest and cheapest solution to resolve their debts and it allows you to make a fresh start after only one year.
- In England and Wales, you can apply online and pay the fee by instalments.
- (for homeowners only) you may be able to avoid having to sell your home if a third party can buy your share of its value after any debts secured on it have been paid.
Disadvantages of Bankruptcy
- Your employment may be affected (people considering bankruptcy should check their contract of employment).
- If you have a property it may be sold.
- Bankruptcy fees are - £680 (£647 in Northern Ireland) - additional fees and costs will be paid out of asset realisation.
- You will appear on the Insolvency Register while you are registered bankrupt (usually 12 months) – the bankruptcy order will remain on your credit file for 6 years from the date of bankruptcy.
- Your credit rating will be affected (probably for some time after your bankruptcy ceases) and there may be other restrictions, such as having your bank and credit card accounts closed.