Handling Bankruptcy with No Assets in the UK
For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.
For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.
Are you worried about your debts and thinking about bankruptcy? You’ve come to the right place. More than 170,000 people visit our website each month seeking advice on debt problems.
In this easy-to-understand guide, we’ll cover:
- What bankruptcy is and how it works.
- How to figure out if bankruptcy is the best option for you.
- The process of applying for bankruptcy and how much it costs.
- What happens if you go bankrupt without any assets.
- The effects of bankruptcy on your life and your credit file.
Dealing with debt can be challenging, and it’s common to feel unsure about seeking help. In fact, Citizens Advice revealed that 60% of adults facing financial difficulties hesitate to seek assistance.1
We know how hard this can be; some of us have been there too. But don’t worry; we’re here to answer your questions and help you make an informed decision.
What if it happens and you don’t have assets?
Your assets are used to repay creditors as much as possible, but before creditors are paid, the sale of any assets is used to pay for the fees associated with bankruptcy.
The charges you face include administration costs starting at £1,990 and a general fee of £6,000.
But if you chose this debt solution without any assets, the Official Receiver will still process your bankruptcy application and you will not have to pay (all of) this money.
You will still have to pay to apply.
If an insolvency practitioner is dealing with your case instead, they may still apply fees to carry out the insolvency service even if you have no assets.
If you have no assets to be sold to pay the Official Receiver, you will also have no assets to pay off creditors. This does not stop you from becoming bankrupt and free from your debts.
Consider a Debt Relief Order (DRO)
Debtors with little or no assets and debts below £30,000 may not be most suitable for bankruptcy.
It may be more advantageous to apply for a Debt Relief Order instead, which only costs £90 to apply for.
The DRO stops creditors from asking you to make payments and stops any enforcement action. After one year, if your financial situation doesn’t improve, most – if not all – of your debts are wiped.
There are lots of other alternatives to bankruptcy in the UK, and I’d recommend checking them all out before making a final decision.
Bankruptcy Comparison
I’ve put together this quick table to help you better understand the differences between Bankruptcy and a DRO (Debt Relief Order) or other potential solutions.
| Bankruptcy vs Alternative Solutions | How It Can Help Tackle Debt | Suitable For Individuals… |
|---|---|---|
| Bankruptcy | A formal legal process that writes off most debts but has significant consequences, including potentially losing your home and negatively impacting your credit rating and job prospects. | …with significant debts that cannot realistically pay them off. More severe option with substantial consequences. |
| Debt Relief Order (DRO) | A formal solution that freezes debts for a year, after which they may be written off. | …with a total debt under £20,000, low income, and minimal assets, who cannot afford to pay off their debts. |
| Individual Voluntary Arrangement (IVA) | A formal, legally binding agreement that typically lasts for 5 years and can write off a portion of your debt at the end. Credit rating will be negatively affected. Homeowners can keep their home. | …with a larger amount of debt who can commit to a fixed repayment plan and want to avoid bankruptcy. |
| Debt Management Plan (DMP) | An informal agreement to pay back non-priority debts in a more manageable way, but does not write off any debt. | …seeking a flexible arrangement without legal proceedings. |
| Consolidation Loan | A consolidation loan involves taking out new credit to pay off existing debts. It can simplify payments and potentially reduce interest rates. But, you could also end up paying more interest overall. | .. with multiple debts looking to consolidate into a single payment, usually with a good credit score to obtain favourable terms. |
| Payment Holiday | Payment holidays offer short-term relief by pausing or reducing payments. Payment holidays don’t reduce the total debt amount and are usually for a short duration. | ..with short-term financial difficulties needing temporary relief from debt payments. |
| Equity Release | Equity release involves homeowners releasing equity from their property. It provides a lump sum or additional income by using the home’s value but reduces the property’s equity. | …with debts and want to unlock the value in their home to pay them off, reducing their property’s equity. (Ideally for older homeowners, usually 55+) |
| Informal Negotiation | Informal negotiation is not legally binding and involves negotiating with creditors for better terms. | …with debts and wish to negotiate terms independently and prefer to have a flexible, non-binding arrangement with creditors. |
How a debt solution could help
Some debt solutions can:
- Stop nasty calls from creditors
- Freeze interest and charges
- Reduce your monthly payments
A few debt solutions can even result in writing off some of your debt.
Here’s an example:
Situation
| Monthly income | £2,504 |
| Monthly expenses | £2,345 |
| Total debt | £32,049 |
Monthly debt repayments
| Before | £587 |
| After | £158 |
£429 reduction in monthly payments
If you want to learn what debt solutions are available to you, click the button below to get started.
Does it clear all debts?
Most debts will be included in your bankruptcy order, such as credit card debts and loan arrears. But you may still have to repay:
- Magistrate Court fines
- Other types of court fines
- Parking fines
- Child maintenance debts
- Student Finance loans
- Social loan debt
You may have to continue paying some existing creditors from your wages after being discharged from bankruptcy, for up to three years.
This is known as an Income Payment Order (IPO). You will not need to attend court to have this arrangement finalised – unless you refuse the repeat payment.
Can you keep your bank account?
Only some. Your bank accounts will be frozen while being made bankrupt and the financial institution will decide whether to close your accounts or leave them open.
Everyone in Scotland, England and Wales has a legal right to an account to receive wages and keep paying essentials like house rent.
Therefore, banks offer a basic account that allows simple transactions.
» TAKE ACTION NOW: Fill out the short debt form
Will I lose my house?
If you rent your house, it is very unlikely that you will lose it by filing for bankruptcy.
This is because the official receiver must leave you with enough money to pay for your rent. However, if you own your house, the official receiver could request that you sell it in order to repay some of your debts.
It might be possible to delay or prevent the official receiver from selling your house if one of the following circumstances applies:
- Someone else has a legal right to your house.
- Someone wants to buy your share of the house.
- Your mortgage covers most, or all, of what your home is currently worth.
If you believe that you can delay or prevent your home from being sold, you should inform the official receiver.
It is also worth noting that you shouldn’t become homeless because of bankruptcy. But, if you do, it is important that you contact your local council to discuss re-housing options.
Thousands have already tackled their debt
Every day our partners, The Debt Advice Service, help people find out whether they can lower their repayments and finally tackle or write off some of their debt.
Natasha
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What happens next?
You may still find life after bankruptcy difficult to navigate the financial side of life after your bankruptcy has ended.
This is because it stays on your credit report for 6 years.
However, there are plenty of steps you can take to rebuild your credit in the meantime, such as:
- Stay on top of your bills and always try to pay on time
- Save for emergencies
- Pay off credit card balances
- Sign up for the electoral roll
- Take out a credit-building loan
You may also find it difficult to progress in your career.
If bankruptcy didn’t impact your employment status, you may find it hard to gain that promotion you’ve been working hard for. If you’re looking for new employment, your bankruptcy may also hinder you from securing a new position.
However, with good money management and careful spending, you can rebuild your credit score and live as you normally would.
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