Bankruptcy is a form of insolvency that writes off debts if you can't afford to repay them, giving you a fresh start. It's a legal process that's usually suitable if you have little hope of repaying your debts in a reasonable amount of time.
When you make yourself bankrupt, nearly all of your unsecured debts are written off, allowing you to you make a fresh start.
Bankruptcy is available for people living in England, Wales and Northern Ireland. If you live in Scotland we’d recommend visiting our website on Sequestration, or Scottish bankruptcy.
In some cases, your creditors can choose to make you bankrupt, but this is usually as a last resort if you can’t, or won’t pay your debts back.
Because all of your debts are written off, Bankruptcy can be a good option. But, it also has some serious implications and shouldn’t be undertaken lightly.
So, let’s talk about some of the benefits and risks of bankruptcy.
If you go bankrupt almost all types of debt will be written off, helping you to make a fresh start. Your creditors won’t be able to contact you, or take further action against you such as taking you to court.
Because your debts will be written off you won’t be asked to make any more payments to your debts, and interest, fees and charges will stop.
That allows you to make a completely fresh start, and hopefully sounds good. However, there are many risks associated with bankruptcy that you’ll need to consider.
There is a cost to going bankrupt and you'll need to pay this fee before you apply. You can find out about these fees on our website.
If you decide to go bankrupt you may have to sell your home or your car, and you'll lose any savings or shares, although in most cases your pension savings will be safe.
If you rent your home, bankruptcy can also affect your tenancy agreement, and it might make it hard to get a new tenancy agreement. You may find that your job is affected too, especially if you work in the legal or financial sectors.
Bankruptcy will also appear on your credit file for six years. This will affect your ability to take out credit both during, and after your bankruptcy has ended and could limit your borrowing options.
Your bankruptcy will usually last for 12 months, during which time your finances are overseen by the official receiver from the Government Insolvency Service. You might also be ordered to make monthly payments to them for up to three years after your bankruptcy, if you can afford to.
You'll also face other restrictions during your bankruptcy, including the amount of money you can borrow. You won’t be able to borrow more than £500 without telling a lender that you’re bankrupt, and you must co-operate with the official receiver and give them any information they need.
And finally, its really important to get expert debt advice to make sure that bankruptcy is suitable for you and your individual situation.
We offer free debt advice online or over the phone.
We'll help you put together a realistic budget and a recommend the most suitable debt solution for you.