Bankruptcy

If you’re made bankrupt:

  • you don’t have to deal with the people you owe money to yourself – a public official called the official receiver takes control of your money and property, and deals with your creditors
  • the things you own may be sold and used towards paying your debts, such as your house or car
  • most types of debt are written off once you have been discharged from bankruptcy, normally after a year.

Going bankrupt involves going to court. It could cost you up to £705, or more if you choose to use a solicitor. Your name and bankruptcy details will be published on the national register of bankruptcies, called the Individual Insolvency Register.

There’s no minimum amount of debt required to go bankrupt but if the value of your unsecured debt is greater than the value of the belongings you own, such as property or vehicles, it may be an option for you. Unsecured debts include things like credit cards, personal loans and store cards.

If you have belongings or assets like a house, car, savings etc that you could sell to clear all your debts, but choose not to, bankruptcy could be refused.

As well as applying for bankruptcy yourself, your creditor(s) can apply to make you bankrupt, even if you don’t want them to do so. For a creditor to make you bankrupt, you must owe at least £5,000.

You’ll normally be allowed to keep certain things like household goods and enough money to live on during the bankruptcy period but bankruptcy may have a serious impact on your day-to-day life. You have to follow certain rules called restrictions during the bankruptcy period.

The bankruptcy restrictions you’ll have to follow say that you can’t:

  • Get credit of £500 or more without telling the lender about your bankruptcy
  • Act as an insolvency practitioner
  • Carry out a business in a different name from the one under which you were made bankrupt, without telling everyone you do business with the name under which you were made bankrupt
  • Act as a director or get involved with setting up, promoting or running a company without permission from the court

You could also lose your home, be barred from working in certain jobs and find it very difficult to get credit for several years. When the bankruptcy order is over, you can make a fresh start and the money you owe is usually written off. In most cases, this can be after only one year. Most types of creditor have to stop action to get their money back following a bankruptcy order.

The bankruptcy process varies slightly in Northern Ireland and Scotland.