Bankruptcy at a glance

Bankruptcy benefits

Bankruptcy drawbacks

It is a quick solution if you have large debts that would take you many years to pay off through another debt solution or if you have no funds to repay your debts.

Once bankrupt, you’re no longer in control of your assets. A Trustee will be appointed to go through your finances, assets and debts and investigate the cause of your bankruptcy. The rights for and interest in your assets transfer to the Trustee, too.

It only lasts one year, allowing you to make a fresh start after 12 months. However, if you have a surplus in your monthly income, you may have to make an income payment for up to three years.

Any assets deemed to be of excessive value are likely to be sold in order to pay your creditors. This could include your house or other property, motor vehicles, personal items or other household items that are considered ‘non-essential’.

All debts within the bankruptcy will be written off at the end of the 12-month period.

If you have a surplus income of £20 or more a month, you may be expected to pay this surplus into the bankruptcy for up to three years. If you just receive state benefits, then you won’t be expected to make a payment.

Creditors will stop chasing you and liaise with the trustee (who will be either the official receiver or a private insolvency practitioner) on your behalf.

Bankruptcy prevents you from practising in some professions and can affect others, so be sure to check your employment contract.

Creditors can’t take further action against you, unless the debts are secured against your assets, such as your home or any vehicles owned by you.

Bankruptcy has an impact on your credit rating for six years from the date the bankruptcy order is made.

You are permitted to keep essential items needed to satisfy basic domestic needs and for work, providing they are not of excessive value.

If you run a business, it may be closed down, and if you have any employees, they will be dismissed, and value in stock and other business assets may be sold.

Obtaining credit of £500 or more without disclosing you are bankrupt is an offence.

While you are bankrupt, you can’t act as a director of a company unless you have received the court’s permission, and there are other restrictions around doing business, too.

Anybody who has information about your assets could be publicly examined in court if the Trustee believes this will aid the investigation.

Notice of your bankruptcy will be advertised in the London Gazette and possibly your local paper.

While you are bankrupt and for three months after you are discharged, your details are displayed on the Individual Insolvency Register, which is a public database.

Pension payments, including lump sums drawn down, are not excluded from consideration within your bankruptcy as income.

If you have joint debts, for example with a partner, creditors will look to your partner to pay any joint debts in full and your bankruptcy could affect their credit score.

You will still be liable for certain debts.

Bankruptcy can affect your immigration status.