Declaring yourself bankrupt is not an easy decision. You will have to think carefully about the consequences and benefits of going bankrupt. It is best to talk to a free debt advisor about your options and situation in more detail. This article is about declaring yourself bankrupt in the UK only (If you live in England or Wales only).
What is bankruptcy?
Bankruptcy is a method of dealing with your debts. It is a legal declaration that you can’t pay off your debts and for most people, it is the last resort (please read our article, is bankruptcy right for me?). It allows you to make a fresh start after you have been discharged, as all your debts will be written off afterwards. But the process can be a difficult one as you may lose control of all your assets.
Is bankruptcy the right option for me?
Bankruptcy is suitable for anyone who can’t find a suitable way of paying off their debts and only have a few assets. You might want to consider alternatives to bankruptcy if you are a homeowner as going bankrupt puts your house at risk if you don’t have enough equity in it. Also if you are a tenant, your landlord can legally evict you if you have fallen behind on your rent.
You can file for bankruptcy if you owe one or more creditors a total of £750 or more. If you owe less than £15,000, have disposable income of £50 a month or less and own assets worth £300 or less (excluding a car worth £1,000 or less), then you could be able to apply for a Debt Relief Order (DRO).
You can find more information in our article, is bankruptcy the best option for me. We suggest you seek free debt advice before making the decision to go bankrupt.
How to apply for bankruptcy
Applying for bankruptcy is much easier than it used to be. You can now apply for bankruptcy online. All you need to do is create an account and then provide information about yourself relating to debts, incomings, expenses etc. You should also include any letters you receive about your debts, such as letters from bailiffs.
Your application will then be reviewed by a member of the Insolvency service team to see if bankruptcy is suitable for you. It can take up to 28 days to get a decision.
How much does it cost to go bankrupt?
It will cost you £680 to apply for bankruptcy. If you can not afford this fee, you might have the option to pay in instalments (please contact the insolvency enquiry line for more information). Please talk to a free debt advisor before paying the bankruptcy fee.
Can I refuse to pay the bankruptcy fees?
It would not be recommended that you simply refuse payment of the fees as this could lead to further action being taken to recover the fees. If you have concerns that the administration of your bankruptcy has not followed the correct process then you are able to raise a complaint. As part of your complaint, you can state how you would like the complaint resolved and this could be by asking for the fees to be waived. You can find details of who to complain to, response times and the escalation process on the Gov Website.
Please note, that bankruptcy can affect your benefits.
What happens after I go bankrupt?
Once you have submitted your application for bankruptcy you will receive a copy of the bankruptcy order and could be interviewed about your situation. An Official Receiver (OR) will be assigned to you within 2 weeks of receiving your bankruptcy order. They will look at your assets, income, and expenses and decide on a plan to pay off your debts. If you do not how much you owe after becoming bankrupt, you could contact the OR who oversaw your bankruptcy as a means of establishing the balance of debt owed. In addition to this, your name and details will be published publicly on the Insolvency Register.
You will have to follow any bankruptcy restrictions, such as avoid borrowing more than £500 without informing the OR or acting as a director of a company. It is a criminal offence to break any bankruptcy restrictions. You can find more information on bankruptcy restrictions on the Gov Website. If you owe money to any creditors, you can not pay this and they can’t ask you for payments. Creditors will have to make a formal claim to the trustee for the money owed.
After 12 months you will normally be discharged from bankruptcy and released from any restrictions and debts. You can also cancel your bankruptcy (also known as bankruptcy annulment) before you are discharged.
Can I be forced into bankruptcy?
The majority of bankruptcy cases are voluntary, where the individual decides themselves (with the advice of debt advisors) to go bankrupt. However, there are cases where you might be forced into bankruptcy. This is normally the case where creditors file a bankruptcy petition against debtors.
While creditors are legally allowed to do this, they normally will not. This is because most creditors fail to meet the criteria of filing involuntary bankruptcy petitions. The criteria for involuntary bankruptcy is normally:
- You must be able to prove that you are owed at least £5000.
- Check for any other bankruptcy petitions against the debtor
- Complete the necessary forms
- Pay the fees (£990 petition deposit and £280 court costs)
For more details, please visit the Gov website.
Can I be refused bankruptcy?
On occasions, a judge will make the decision to delay or dismiss a bankruptcy petition but this is normally when a debtor is being made bankrupt by a creditor and requests more time to come up with a solution or has evidence that they don’t owe the money.
You may also be refused bankruptcy in the following situations:
- If you have debts of less than £750.
- If the judge does not think you have seriously considered the implications of bankruptcy.
- You are looking for an ‘easy way out’ when you can afford to repay your debts.
To avoid any confusion make sure you have taken advice from a debt adviser before going ahead with bankruptcy.
Can we file for joint bankruptcy?
Bankruptcy is based on the individual, however, you can both be declared bankrupt at the same time. Any joint debts should be declared in full on each bankruptcy application form.
I have a Tomlin Order and a Consent Order what happens to them if I go bankrupt?
The Official Receiver in bankruptcy has the power to overturn a consent order. S/he also has the power to apply to the court to ascertain the contents of the schedule contained within the Tomlin Order, should you be unable to provide it.
Can I claim PPI if I have been bankrupt?
Normally if your PPI relates to a mis-sold policy that predates your bankruptcy, the money goes to your trustee in bankruptcy to distribute to your creditors.
The reason for this is when you go bankrupt it is not just your debts that your trustee takes over, but any claims you may have had.
Like with your debts you do not get these returned to you after you are discharged from your bankruptcy, but they stay with your trustee.
Assistance with declaring bankruptcy
If you need help deciding whether Bankruptcy is the right option for you, there are a number of free, impartial debt charities that you can speak to such as National Debtline and Debt Advice Foundation. If you’re sure Bankruptcy is the right option for you and you need help completing the forms then there’s no need to pay any fees. Your local CAB, local County Court, and the Insolvency Service can all answer any technical questions you have.
How long will bankruptcy last?
You are discharged one year after bankruptcy. However, this may not always be the case as a court can postpone the discharge and there may be strings attached to the discharge. For example, if you have assets that have not been realised or sold, then the court will still want to realise them at a later date. Please also note, you will have to wait longer to be discharged if you have been made bankrupt before. In fact, 5 years longer, and even then it is not guaranteed.
What if someone attempts to hide money during bankruptcy?
If they are declaring bankruptcy on a number of occasions and hiding money from the OR, then this is Perjury. You will need to speak to the police. Perjury is a criminal offence and if you have evidence of it you have a duty to report it.
The police will decide if there is a case worth pursuing. You can also speak to the Official Receiver’s office that handled the bankruptcy.
I live outside England or Wales
You can not apply for bankruptcy in England or Wales if you live in Scotland or Northern Ireland. Please speak to a free debt advisor for more information. You may also want to reach this article on bankruptcy and moving abroad.
Need further advice?
We suggest taking a look at the GOV website for more information on declaring bankrupt.