Personal Bankruptcy

What is bankruptcy?

Bankruptcy is a formal insolvency procedure for individuals who can't pay their debts. It's set out under the Insolvency Act 1986 and is one of the most significant debt solutions available — both in what it does for you (most unsecured debts are written off when you're discharged) and in what it costs you (significant impacts on your assets, your credit file, and certain types of work).

In England, Wales and Northern Ireland, you can apply to make yourself bankrupt online through the Insolvency Service's adjudicator. Creditors can also apply to make you bankrupt if you owe one creditor more than £5,000. Scotland has its own equivalent procedure called sequestration.

Bankruptcy isn't a fresh start exactly — it's more of a hard reset. The legal effects are powerful, and the trade-offs are real. Free regulated debt advice should be the first call for anyone considering it.

How bankruptcy works in practice

The bankruptcy process moves quickly once an application is filed. The typical path is:

1. Application. You apply online through the Insolvency Service, paying a £680 fee (which can be paid in instalments). You provide details of your debts, income, expenses and assets.
2. Adjudicator's decision. An adjudicator reviews the application — they usually make a decision within 28 days. Most applications are approved.
3. Bankruptcy order. Once made, the bankruptcy order takes effect immediately. Your case is assigned to an Official Receiver or, in some cases, a Trustee in Bankruptcy.
4. Statement of affairs. The Official Receiver will interview you and review your full financial picture — what you own, what you earn, what you spend and what you owe.
5. The 12-month period. You're bankrupt for 12 months. During this time, certain restrictions apply (more on these below). Your assets above a basic threshold can be sold to pay creditors.
6. Discharge. After 12 months, you're automatically discharged from bankruptcy. Most unsecured debts are written off at this point.

Who bankruptcy is for

Bankruptcy is generally considered when:

• Your total debts are too high to repay in a reasonable period
• You don't qualify for a Debt Relief Order (typically because your debts exceed £50,000, your assets exceed £2,000, or your monthly surplus exceeds £75)
• An IVA isn't suitable — for example, you can't sustain monthly payments
• You want a definitive end-point with discharge after 12 months

It's a serious step, and not the right one for everyone in financial difficulty. Many people who think bankruptcy is their only option turn out to qualify for a DRO or a DMP after talking to a free regulated debt adviser. That conversation should always happen first.

What bankruptcy costs

The application fee is £680 as of 2024. This can be paid in instalments, with a minimum of £5 to start the application. The full £680 must be paid before the adjudicator will consider it.

For people who genuinely can't afford the fee, fee waivers and reduced fees aren't available — this is one of the reasons DROs (fee-free since June 2024) became significantly more accessible. If the cost of bankruptcy is itself a barrier, a free regulated debt adviser can help establish whether a DRO might be the better route.

Beyond the application fee, there are no ongoing costs to you during the 12 months. The Official Receiver's costs are paid out of any assets that are sold and any payments collected via an Income Payments Agreement (more on this below).

How long bankruptcy lasts

The bankruptcy itself lasts 12 months from the date the order is made. At the end of that period, you're automatically discharged, and most of your unsecured debts are written off.

Two things continue past discharge:

• Income Payments Agreement (or Order). If you have surplus income, the Official Receiver may ask you to make payments out of your wages for up to three years. This continues even after discharge.
• Credit file impact. The bankruptcy stays on your credit file for six years from the date it was made, regardless of when you're discharged.

If you're not co-operating with the Official Receiver, discharge can be suspended — but for the overwhelming majority of bankruptcies, the 12-month timeline holds.

What happens to your debts

Most unsecured debts are written off on discharge. The usual list:

• Credit cards and store cards
• Personal loans and overdrafts
• Catalogue and payday loans
• Rent and utility arrears
• Council tax arrears
• Most HMRC debts
• Outstanding mortgage shortfalls (after repossession)

Some debts aren't written off and remain payable after discharge:

• Court fines
• Child maintenance arrears
• Student loans
• Most secured debts (mortgages, secured loans, car finance)
• Damages awarded in personal injury claims
• Debts arising from fraud

What happens to your assets

This is the area where bankruptcy bites hardest. The Official Receiver has the power to sell most assets above a basic level to pay creditors. What you keep:

• Household goods (clothes, bedding, furniture, basic kitchen equipment)
• Tools of your trade if you need them for work
• A vehicle of modest value if it's essential
• Pensions in most cases (a 2012 Supreme Court ruling protects most workplace and personal pensions)

What can be sold:

• Your share of any property you own
• Cars worth more than a basic level (currently usually around £2,000–3,000)
• Savings and investments
• Items of unusual value (jewellery, collectibles, etc.)

How bankruptcy affects your credit, employment and life

The credit file impact is significant: bankruptcy shows for six years from the date the order is made. During and after that period, accessing credit will be much harder, and what you can get will be more expensive.

Certain employment can be affected. Bankruptcy specifically disqualifies you from being a company director, acting as an Insolvency Practitioner, or being an MP. Roles in financial services, the legal profession, and accountancy can have specific restrictions. The Civil Service, the police and the armed forces can also have specific rules.

During the 12-month bankruptcy period, you can't obtain credit of £500 or more without disclosing that you're bankrupt. You can't act as a company director or be involved in setting up, running or managing a company without court permission.

Bankruptcy is also a public record — it's recorded on the Individual Insolvency Register during the bankruptcy and for three months after discharge.

How UK Debt Team can help

We're an introducer, not a debt advice service. Bankruptcy is too significant a decision to take without proper, regulated advice — and that's the role of a regulated debt adviser, not us.

What we can do is connect people seeking debt help with regulated solution providers who can talk through whether bankruptcy is genuinely the right route, or whether a DRO, IVA or DMP might be a better fit. For people who already know they want bankruptcy and just need procedural help, free charity services like StepChange and Citizens Advice are excellent. The organisations listed below should be the first port of call for anyone serious about applying.