Bankruptcy is one way of dealing with debts you cannot pay. Becoming bankrupt is a very difficult decision and it should only be taken as a last resort.

Bankruptcy is a formal insolvency route for individuals with serious debts that they cannot pay. Bankruptcy is often the last resort and is usually applied when no meaningful alternative can be offered to creditors. Bankruptcy is a court driven process.

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.

Disadvantages of bankruptcy

  • All your assets, apart from those required for a basic standard of living, will be sold. This is likely to, after a year, include your house.
  • You will not be allowed to obtain more than £500 credit unless you first disclose that you are bankrupt.
  • Any income you have in excess of that needed for your basic needs will have to be paid to your creditors.
  • Your job may be at risk: certain trades and professions will not allow you to work when bankrupt.
  • 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.
  • Your bankruptcy will be publicly available on the Insolvency Register.

Advantages of bankruptcy

  • Once the bankruptcy period has come to an end, all debts are written off.
  • Depending on your circumstances you may be debt free in 1 year
  • If you live in rented accommodation and up to date with your rent you will be able to continue paying the rent. You have little to lose and ALL your debts will be written off at the end of the bankruptcy period.

Is bankruptcy right for me?

As long as you live in the UK and have more than £5,000 of UK debt, you can declare yourself bankrupt. You will have to appear in court in person so that you can present your bankruptcy application documents and pay the bankruptcy deposit (£550) and a adjudicator fee (£130).

Applying for bankruptcy is now an online process. You can access this service here.

More bankruptcy pages

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Updated on 2016-10-06T14:57:07+00:00, by Kristian Stock.