Bankruptcy is one way of dealing with debts you cannot afford to repay. It is a court order that you can apply for if you have unmanageable debts. It may be the best way for you to free yourself from excessive debts but the decision should not be taken lightly.

What is bankruptcy?
Bankruptcy is a legally binding form of insolvency, which gives you some relief from your debt in return for you agreeing to certain terms. To clear your debts, your assets are sold and split among creditors. While you are usually discharged from bankruptcy after a year, certain circumstances and disposable income may require you to pay into it for three years. This is a very serious course of action with numerous negative consequences.You are protected from legal action and at the end of the term your outstanding debt is written off.

How long will bankruptcy last for you?
Bankruptcy normally lasts for 12 months. Once this has passed, regardless of what you owe, your bankruptcy will be discharged.

Will your credit rating be affected?
In short, yes. Your credit rating will be affected in the long term as the bankruptcy order will remain on your file for 6 years following bankruptcy.

What are the criteria for a Bankruptcy?

  • Debt exceeding £750
  • You can pay £680 admin fees (£130 application fee, £550 bankruptcy deposit) this can be paid by installments to the insolvency service, however, the application cannot be submitted until the fee has been paid in full.
  • You own a property, run a business or live in the U.K.


  • During the bankruptcy you cannot use your bank account, credit cards etc
  • The official receiver must be given details regarding all financial affairs
  • Creditors cannot take legal action against, or pursue you, during bankruptcy
  • Details of your bankruptcy status may be published so creditors can administer a claim
  • You cannot act as a director of a company until you are discharged (released) from bankruptcy. This is usually 12 months from the date the court made you bankrupt
  • If you are self-employed, you can lose your business and all employees will lose their jobs
  • You are on an insolvency register for three months following discharge



  • Once you have completed the bankruptcy you will be completely free from any unsecured debts that were included in the bankruptcy proceedings.
  • Bankruptcy provides automatic discharge after one year – less in some cases – and with that comes relative peace of mind.


  • Your assets, including your home and car, can be included and sold to raise money to repay creditors.
  • You won’t be able to act as a director of a company.
  • You will need court permission to take any part in the management of a limited company.
  • If the official receiver believes it would help the investigation, members of your family, or employers could be scrutinised in court.
  • It may be difficult to obtain credit in future, as a record of the bankruptcy order will stay on your credit history for up to six years.