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Bankruptcies

If you have a debt problem, one option for sorting it out may be bankruptcy. You can apply for bankruptcy if you cannot pay your debts.

As well as self-application for bankruptcy, someone to whom you owe money (a creditor) can apply to make you bankrupt, even if you don’t want them to. For a creditor to make you bankrupt, you must owe at least £5,000.

However, bankruptcy may not be your only option and it may not be the best one for you. You could opt for a debt relief order. If you have debts, income and property below, £10,000 you could be eligible for a debt relief order. This is a cheaper alternative to bankruptcy.

Advantages of going bankrupt

When the bankruptcy order has expired you can make a fresh start - in many cases this can be after a year. Bankruptcy has several advantages including:

  • The pressure is taken off you because you won’t have to deal with creditors
  • You are allowed to keep certain things, such as household goods and a reasonable sum, to live on
  • Creditors are obliged to stop most types of court action to get their money back following a bankruptcy order
  • The money you owe can usually be written off.

Disadvantages of going bankrupt

To apply to go bankrupt you will need to pay a Court Fee of £680.

Declaring bankruptcy has several disadvantages including: 

  • If your income is high enough, you will be asked to make payments towards your debts for 3 years
  • It will be more difficult to take out credit while you are bankrupt and your credit rating will be affected for 6 years
  • If you own your home, it may have to be sold (but you may still be able to apply to your local authority for re-housing)
  • Some of your possessions may have to be sold; (ie: your car and any luxury items you own
  • If you are, or are about to be, at the right age to get your pension savings, these may be taken
  • Certain professions do not allow people who have been made bankrupt to continue working
  • If you own a business,it may be closed down and the assets sold off
  • Going bankrupt can affect your immigration status
  • Your bankruptcy will be published publicly

What happens at the end of bankruptcy?

Your bankruptcy will normally end after a year. The Official Receiver will inform you when it is over.

Most debts that haven’t been paid will be written off although some debts like court fines and student loans can never be written off.

Even when you are no longer bankrupt, you could still have a bankruptcy restriction order made against you. This can last for up to 15 years and it will restrict your financial affairs. This order could be made if, for example, you do not co-operate with the Official Receiver, or if you take on debts knowing that you won’t be able to repay them.

How to declare bankruptcy

You can apply to go bankrupt online by filling in a form at gov.uk/apply-for-bankruptcy. It will cost £680. If a bankruptcy order is made this money is not refundable.

You can choose pay:

  • Online – and elect to pay the fee in instalments
  • In cash at any Royal Bank of Scotland branch – (but you cannot pay in instalments this way)

If you make false statements on the form, or don’t tell the truth about all your property, this is a criminal offence and you could be fined or sent to prison.

If you need help to fill in the form, contact your local Citizens Advice or contact the Insolvency Service enquiry line or Bhardwaj Ltd on 01923 820966.

Before making a bankruptcy application, it is wise to ensure that you have sufficient cash to meet your day to day expenses because once a bankruptcy order is made your accounts will be frozen.

If your application is accepted and a bankruptcy order is made, your money will come under the control of the Official Receiver. The Official Receiver will arrange an interview with you. After your interview, they will tell your creditors about the bankruptcy and send them a report with a summary of your financial situation. Your assets may be sold to pay off some or all of your debts.

Your name and bankruptcy details will be published on the national register of bankruptcies, called the Individual Insolvency Register.

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