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Bankruptcy – ULTIMATE GUIDE (2023)

If you’ve landed on our bankruptcy page, you probably want to know more about bankruptcy to work out whether it’s a possible debt solution for you. That’s exactly what you’ll get below. Read on to understand how bankruptcy works and if you should apply.

Are you worried about your debts and thinking about bankruptcy? You’re not alone. In fact, over 170,000 people visit our website seeking advice on debt solutions each month.

In our ultimate guide to bankruptcy, we aim to answer your questions and ease your worries. We’ll cover:

  •  Understanding what bankruptcy is
  •  Knowing how bankruptcy happens
  •  Deciding if bankruptcy is the right choice for you
  •  Applying for bankruptcy and its cost
  •  The effects of bankruptcy on your life and credit file

We know how tough it is to deal with debt; some of us have been in a similar situation. But remember, there is always a solution to every problem, including debt.

Ready to learn more about bankruptcy and if it’s the right choice for you? Let’s dive in!

What is bankruptcy?

Bankruptcy is an insolvency debt solution for people who cannot realistically repay their debts in a reasonable time

It involves a legal process whereby at the end of the process many of their debts could be written off, giving the debtor a fresh start. However, there are many drawbacks to declaring yourself bankrupt. 

Bankruptcy statistics tell us that the use of this debt solution has been in steady decline for over a decade. In contrast, the use of Debt Relief Orders, Debt Management Plans and IVAs have steadily increased. But that doesn’t mean bankruptcy won’t be the best option for you. The best debt solution is based on personal circumstances. 

How can bankruptcy happen?

Bankruptcy can happen either by the debtor making a petition to become bankrupt, or by a business applying to make the debtor bankrupt

It’s more common for a debtor to apply for bankruptcy than it is for a business to make a debtor bankrupt. For a business to try and make the debtor bankrupt, the debtor must owe them more than £5,000. 

As declaring yourself bankrupt is far more common in the UK, the rest of this guide will primarily focus on the process of trying to make yourself bankrupt. 

Don’t worry, here’s what to do!

There are several debt solutions in the UK, choosing the right one for you could write off some of your unaffordable debt, but the wrong one may be expensive and drawn out. 

Fill out the 5 step form to find out more.

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How much debt do you have?

This isn’t a full fact find, MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

How to go bankrupt yourself

You must apply to make yourself bankrupt. 

To make a bankruptcy application, you need to make an online application and pay the application fee. You won’t receive a copy of the Bankruptcy Order until the application has been approved. Bankruptcy applications can be rejected. 

Before making an application, always check if this is the most appropriate debt solution for you. You can get personalised support by speaking to a UK debt charity. 

How does bankruptcy work?

Bankruptcy works by applying to become bankrupt to the Insolvency Office, which requires you to submit a form and pay an application fee. An Official Receiver is then appointed to your case, who is someone that will organise your debts and finances during the whole bankruptcy process. 

Once approved, the bankruptcy will last for 12 months. At the start of this period, your bank account will be frozen and any high-value assets might be sold, such as your home or car. 

At the end of the 12-month period, you can be discharged from bankruptcy and all applicable debts could be written off.

What are bankruptcy payment plans?

During the bankruptcy process, you may be asked to keep paying some money to your creditors through a repayment agreement called an Income Payments Agreement (IPA). 

This will only happen if you have a greater income than what is deemed necessary for reasonable living, such as rent, bills, and groceries. The IPA will usually last three years and the amount you repay each month can be adjusted if your personal finances change. 

It’s the Official Receiver who will look at your recent financial history to decide whether you can afford repayments to creditors and maintain reasonable living. You must also inform the Official Receiver of any changes after an IPA has been set up, even if this would cause your repayments to increase. 

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How far back does the Official Receiver go?

As part of the bankruptcy application process, the Official Receiver will investigate any of your financial transactions made up to five years previously

This information will be used for different purposes, including your ability to commit to an IPA and to identify any deprivation of assets. 

What happens after I go bankrupt?

Once you become bankrupt, you must live under the restrictions imposed on you by the Official Receiver. It’s important to keep to these restrictions to allow your bankruptcy to end, known as a bankruptcy discharge. 

When will you be discharged from bankruptcy?

You will typically be discharged from bankruptcy 12 months after the Bankruptcy Order was made.

However, your bankruptcy discharge will only be approved if you have kept to all the restrictions imposed on you for the full 12 months. The Official Receiver can extend your bankruptcy and stop you from getting discharged if they see fit. 

You should also know that as the average IPA lasts for three years, any IPA will continue after your bankruptcy discharge date. So you might not be entirely free from your debts even after the bankruptcy. 

Who will see that I’m bankrupt?

Bankruptcies are recorded on the Individual Insolvency Register in England and Wales and on comparable registers in Scotland and Northern Ireland. Anyone can search these records online to find details about your bankruptcy. 

The record will stay on the register until three months after you are discharged. Learn more about this topic in our bankruptcy searches guide!

Creditors can also search and see if you’ve ever declared or been made bankrupt. They will do this by looking at your credit file, where the record will remain for six years. This will significantly reduce your chances of getting approved for credit. 

Does bankruptcy clear all debt UK?

Bankruptcy doesn’t cover all UK debts. It can potentially help you write off many types of debts – but not all of them. For example, child maintenance payments and Magistrate Court fines cannot be included. 

If a debt cannot be included in the bankruptcy, you’ll still need to make payments towards that debt. If you don’t repay, the creditor can take steps to recover the money.

Can I go bankrupt to clear student loans?

No, student loans owed to the UK Government cannot be written off as part of a bankruptcy. But there aren’t any other debt solutions that will get your student debt wiped either. 

Even though student loans cannot be written off as part of a bankruptcy application, you won’t have to make repayments unless you’re earning above the student loan repayment threshold. So if you’re unemployed you won’t be forced to make repayments. 

How to apply for bankruptcy

Bankruptcy can only be applied for online. There is no paper form you can send. You must submit an online application via the government’s website. As part of the application, you’ll be required to provide certain information. 

You will need to show (when applicable):

  1. Wage slips
  2. Pension statements
  3. Benefit statements
  4. Recent bills
  5. Recent letters from bailiffs
  6. Debt statements

For help with the application, you can call the Insolvency Service helpline on 0300 678 0015. If you’re in Scotland you might want to look into applying for minimum asset process (MAP) bankruptcy.

How much does it cost to go bankrupt?

You must pay a £680 application fee to apply for bankruptcy. This can be paid online or you can pay in cash at some high-street bank branches. If you decide to pay in cash, you’ll be told which banks you can attend to pay. 

You can pay the application fee in instalments when you pay online. Your initial payment must be £5 and you can then pay the fee in as many instalments as needed. You cannot pay the bankruptcy application fee in instalments if you decide to pay with cash. 

However, the full amount must be paid before the application can be submitted. So bankruptcy payment plans might not be that beneficial. 

Can I be made to go bankrupt?

Yes, another entity can apply to make you bankrupt if you owe more than £5,000 and have shown an unwillingness to pay. You can also be made bankrupt by another entity if you lied to get approved for an Individual Voluntary Arrangement (IVA) with them included, or if you default on an IVA and the creditor is included within the IVA. 

Who is bankruptcy suitable for?

Bankruptcy can be suitable for an individual who has debts they cannot afford to repay in a reasonable time. There is no fixed amount you need to be in debt to apply when applying to make yourself bankrupt. 

However, bankruptcy is a nuclear debt solution with serious immediate and long-term consequences. You should consider other debt solutions before proceeding with a bankruptcy application. 

If it doesn’t sound like bankruptcy is the right option for you, head back to our debt solutions page to learn about other potential debt solutions! 

How will bankruptcy affect my life?

Bankruptcy will affect your life because you’ll have to live under restrictions placed on you by the Official Receiver until you’re discharged. You can also be forced to continue making debt repayments from your wages and lose your most valuable assets, including your home and car. 

Going bankrupt can often be a more attractive debt solution compared to alternatives if you’re applying for bankruptcy with no assets. However, this doesn’t automatically mean bankruptcy will be the best debt solution for your situation. 

Will I lose my car if I declare bankruptcy?

You may or may not lose your car if you declare bankruptcy. You won’t be asked to give up your vehicle if it’s essential for work or if you need it for essential living due to a disability. If the car is essential to help a dependent, then you won’t have to give it up either. In Scotland, you can only keep your car for work purposes if it’s worth £3,000 or less.  


Most Hire Purchase (HP) Agreements have a clause in them stating that the company can take back the vehicle if you become bankrupt. So they could take the car off you in these situations, regardless of how essential the vehicle is to your daily needs. 

Will my bankruptcy affect my spouse and others?

Bankruptcy won’t affect your spouse or other people if the debts included in your bankruptcy are solely in your name. However, going bankrupt with a joint debt with another person can have consequences. 

If you took out a loan together and you become bankrupt, the other person is still obligated to pay the full amount – not 50% of the debt. This is because joint debts are 100% owned by both parties. 

How long will bankruptcy affect my credit file?

A bankruptcy will be visible on your credit file for six years from the date the Bankruptcy Order was made

Any creditor you apply to for credit will be able to see that you went bankrupt within these six years. After six years, the bankruptcy record is deleted from your credit file. 

How can I rebuild my credit file after bankruptcy?

You can start to repair your credit score after being made bankrupt, but it will take time. You should manage your finances well to ensure you pay your bills on time and avoid going overdrawn or getting into further debt.

If you still have outstanding debts after being discharged, you should prioritise paying your debts or using other debt solutions to clear your debt. 

Advantages and Disadvantages of Bankruptcy

There are many pros and cons of bankruptcy to know before weighing this solution up against others. Below we have summarised the main advantages and disadvantages of bankruptcy. 

Advantages of bankruptcy

  • Many debts can be written off
  • You will get a fresh start and a clean slate (maybe not completely!)
  • You will be left with enough money for reasonable living
  • Household items won’t need to be sold

Disadvantages of bankruptcy

  • The bankruptcy will be made public
  • The bankruptcy will significantly affect your credit file
  • You may still be forced to make debt repayments
  • Not all debts can be included
  • Some of your most valuable assets could be sold, such as your home
  • You might lose your job if you work in finance or law

Check the rules after you go bankrupt

After you go bankrupt, you will be under restrictions imposed by the Official Receiver. These are also known as bankruptcy rules. The most common rules are:

  1. You cannot borrow more than £500 without telling the lender you have gone bankrupt and without asking permission from the Official Receiver to make the credit application.
  2. You cannot work in certain professions, such as an insolvency practitioner
  3. You cannot set up a new company or work as a director without court permission
  4. You cannot continue a previous business under a new name
  5. Travelling overseas will be harder and in Northern Ireland, you’ll need to get permission from the court

The above are just examples and the list isn’t exhaustive. 

If you get a letter saying you’ve broken a bankruptcy rule

If the Official Receiver thinks you may have broken one of the rules, they can ask for numerous orders to continue their investigation. For example, they could order your mail to go to their office or they could order a public examination. 

If they conclude that you did break a rule, they will send you a letter explaining why they have come to that conclusion. This is a serious situation which could even result in a prison sentence. However, you can make an appeal within 14 days of the letter. You would need to submit evidence to support your appeal within 28 days. 

Don’t ignore these letters and act swiftly! 

Is an IVA better than bankruptcy?

It’s usually advised to use an IVA instead of bankruptcy if possible. But the only way to know the best debt solution for you is to get personalised advice, which is available for free through many UK debt charities or from Citizens Advice.

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If bankruptcy isn’t right for you…

MoneyNerd can help you explore alternatives to bankruptcy. If you already know it’s not right for you, take a look at some debt solutions that may be more suitable by reading our bankruptcy alternatives page for free.

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  • Affordable repayments
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  • Lower monthly repayments