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Bankruptcy

About bankruptcy

This page tells you about bankruptcy. It helps you to work out whether bankruptcy is an option for you, explains how to go bankrupt and tells you what happens when you're made bankrupt.

Bankruptcy is a court order that you can apply for if you are in debt.

Someone you owe money to can also apply to make you bankrupt even if you don't want this.

You might want to think about bankruptcy if you have no money to pay your debts, or have so little that it will take you years to repay them.

To find out how to work out if you've got money to pay off your debts, see How to sort out your debts.

Once you have been made bankrupt, you don't have to deal with the people you owe money to (your creditors). An official called the Official Receiver takes control of your money and property, and deals with your creditors.

When the bankruptcy order is over, you can make a fresh start and the money you owe is usually written off. In many cases, this can be after only one year. Creditors have to stop most types of court action to get their money back following a bankruptcy order.

However, there are disadvantages to going bankrupt. These include the fact that it may cost you up to £700 to go bankrupt, you could lose your home if you own it and may lose other valuable possessions too.

Bankruptcy might not be your only option and it might not be the best one for you.

To find out what other options you might have for dealing with your debts, see Options for dealing with debt.

If you are faced with bankruptcy, you'll need expert advice. You can get advice about your debt problems and bankruptcy from your local Citizens Advice bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

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What are the advantages of going bankrupt

Some advantages of going bankrupt are:

  • pressure is taken off you because you don't have to deal with your creditors
  • you are allowed to keep certain things, like household goods and a reasonable amount to live on
  • when the bankruptcy order is over, you can make a fresh start. In many cases, this can be after only one year
  • creditors have to stop most types of court action to get their money back following a bankruptcy order (but in some cases the bailiffs may still be able to take your belongings away)
  • the money you owe can usually be written off.

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What are the disadvantages of going bankrupt

Some of the disadvantages of going bankrupt are:

  • it will cost you up to £705 to go bankrupt. It can be more if, for example you use a solicitor
  • whilst you are bankrupt, you can't apply for more credit
  • if you own your own home, it might have to be sold. However, you may be able to apply to your local authority for re-housing
  • some of your possessions might have to be sold. For example, you will usually lose your car and any luxury items you own
  • some professions don't let people who have been made bankrupt carry on working
  • if you own a business, it is more than likely that the Official Receiver will close down your business, dismiss your employees and sell off the assets
  • going bankrupt can affect your immigration status
  • you can't keep your bankruptcy private. Your details will be listed in the Insolvency Register, which people can access on the internet. Your case could also be published in your local newspaper if there are exceptional circumstances
  • even when you are no longer bankrupt, you could have another order, called a bankruptcy restriction order made against you. These orders can be made, for example, where you did not co-operate with the Official Receiver, or you took on debts knowing that you had no hope of paying them back. They can last for 15 years, and will make your financial affairs very restricted
  • even when you are no longer bankrupt, there are some debts such as court fines and student loans that will never be written off.

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How to go bankrupt

If you decide to go bankrupt, you will need to apply to court.

Before you do this, try to make sure you have enough cash for day-to-day expenses as once a bankruptcy order is made, your accounts will be frozen.

To apply to court for bankruptcy you will need to take the following steps:

Find out which court to go to

This will usually be the county court in the area where you have lived for the last six months (although it can sometimes be where you work). In London, it is the High Court. Any local county court or the High Court will tell you which is the right court for you.

You can find details of your local county court in the telephone book under ‘Courts’. You can also find details of courts that hear bankruptcy cases on Her Majesty's Courts Service (HMCS) website at www.hmcourts-service.gov.uk.

Contact details for the High Court in London are:

Bankruptcy Court
Royal Courts of Justice
Strand
London
WC2A 2LL
Tel: 020 7947 6000
Tel: 020 7947 6441 (Bankruptcy enquiries)

Pay costs and fees

When you apply to go bankrupt, you will need to pay a deposit of £525. You won't get this back. There may also be a fee of £180, although depending on your circumstances, the court may reduce this amount, or say that you don't have to pay it at all. Ask the court for form EX160 which tells you more about this.

You should make sure you have enough money to cover the deposit before you apply to go bankrupt. If you can't afford to pay the deposit, you might want to think about applying for a debt relief order instead.

Fill in a bankruptcy petition and a statement of affairs

You can print off a bankruptcy petition (form 6.27) and statement of affairs (form 6.28) from the Insolvency Service website at: www.bis.gov.uk/insolvency.

When you fill in the forms, you must list all your creditors, even if you disagree with one of the debts. You must also give details of all your bank account and building society accounts. You will be asked to list other assets and items with a resale value, for example, antiques. Any valuables you list in this section of the form risk being sold.

It’s a good idea to keep a copy of your completed petition and statement of affairs forms as you may need them later at the interview with the Official Receiver.

Swear an affidavit

You will need to go to court and swear an affidavit. This means that you swear to the court you have told the truth in the petition and statement of affairs forms.

You'll need to take the forms with you, along with two copies, the fee and the deposit.

If you make false statements on the forms, or don't tell the Official Receiver about all your property, this is a criminal offence and you could be fined or sent to prison. It is also a criminal offence to conceal property or documentary evidence, or to get rid of property before you go bankrupt.

Once you have sworn your affidavit, the court may either fix a time for the hearing, or hear your case straight away. If your case is in the county court, you will have to attend the hearing.

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What happens when a bankruptcy order is made

At the bankruptcy hearing, the court will decide either to reject your application, or to make a bankruptcy order. The court will reject your application if, for example, they think there is a better solution to your debt problem.

Once the bankruptcy order is made, all your bank and building society accounts will usually be frozen immediately. Your money will come under the control of the Official Receiver.

The Official Receiver will arrange an interview with you to check whether you have any items of value which can be sold to pay creditors. You may be asked to complete a questionnaire (form B40.01) which repeats a lot of the information from the statement of affairs It will help to have a copy of your statement of affairs form handy for this interview. You may be offered a telephone interview with an examiner or you may be asked to attend the Official Receiver’s office, depending on local arrangements. After your interview, the Official Receiver will tell your creditors about the bankruptcy, and send them a report with a summary of your financial situation. Your assets will be sold to pay off some or all of your debts. The costs of the bankruptcy are paid first from the money that is available. The costs include fees that the Official Receiver charges for dealing with your case.

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When does bankruptcy end

Your bankruptcy will normally end after one year.

The Official Receiver will tell you when the bankruptcy is over. Most debts that haven't been paid will be written off. Some debts are not written off at the end of bankruptcy and you will need to make arrangements to sort these out.

You can get help to sort out debts which you can't write off from an adviser, for example, at a local Citizens Advice bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

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Effect on your credit rating

Your bankruptcy will appear on the Insolvency Register until three months after your bankruptcy order has ended (been discharged). If there is a bankruptcy restrictions order against you, this will appear on the register for the length of the order. The register is a public record. Anyone can search the register free of charge online at the Insolvency Service website at: www.bis.gov.uk/insolvency.

The bankruptcy record will stay on your credit reference file for six years so it may affect your ability to get credit even after the order has ended.

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Debt relief orders

If your debts and income are below a certain amount, you may want to think about applying for a debt relief order instead of bankruptcy. This is a cheaper option.

You must have debts of £15,000 or less. These debts must be of a certain type. You must also have spare income of £50 a month or less after paying your normal household expenses.

For more information about debt relief orders, see Debt relief orders.

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More help with bankruptcy and debt

The Insolvency Service

You can get more information about bankruptcy from the Insolvency Service website. Information is also available in languages other than English.

Enquiry line: 0300 678 0015
Website: www.bis.gov.uk/insolvency

Adviceguide

You can get more information about how to deal with debt on the following Adviceguide pages:

Citizens Advice Bureau

If you are thinking about going bankrupt, you should get advice from an experienced adviser. Your local Citizens Advice Bureau can give advice about bankruptcy. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

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Citizens Advice

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