Bankruptcy with No Assets in England and Wales

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

This guide covers bankruptcy in England and Wales. You do not need to own assets to apply, but bankruptcy has important consequences. An adviser can compare it with a Debt Relief Order (DRO) and other options. Scotland and Northern Ireland have different rules.

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. 

If the official receiver administers your case, fees taken from money realised include an administration fee of £2,390 for a debtor application or £3,300 for a creditor petition, plus a £7,200 general fee. Other realisation and distribution fees can apply. These are separate from the £680 application fee.

Having insufficient assets to cover those administration costs does not prevent the official receiver from processing a bankruptcy. You do not have to find that entire amount before applying.

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.

Bankruptcy can proceed without assets. You may still need to make affordable payments from surplus income, and some debts are not discharged.

Consider a Debt Relief Order (DRO)

If you have limited assets and little spare income, ask an approved debt adviser whether a DRO would be suitable before paying to apply for bankruptcy.

There is no DRO application fee in England and Wales. The main limits are no more than £50,000 in debts counted for DRO eligibility, £75 or less spare monthly income and £2,000 of assets, subject to exclusions. One domestic vehicle worth no more than £4,000 can normally be disregarded. Other eligibility conditions also apply.

A DRO normally lasts 12 months. It protects you from most collection action for the qualifying debts included in it, which are normally written off at the end. Excluded debts and debts arising from fraud can remain payable. A DRO does not necessarily stop eviction for rent arrears.

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.

Get free debt advice to compare options for your country and circumstances. A table cannot confirm suitability.

Does it clear all debts?

Bankruptcy normally covers unsecured debts such as credit cards and personal loans. Some debts remain payable, including:

1. Magistrate Court fines
2. Other types of court fines
3. Debts arising from fraud and some compensation awards
4. Child maintenance debts
5. Student Finance loans
6. Social loan debt

If you can afford contributions after reasonable living costs, an Income Payments Agreement (IPA) or Income Payments Order (IPO) can require payments for up to three years, including after discharge.

An IPA is agreed with the trustee. An IPO is made by a court. Payments are made through the bankruptcy arrangements, rather than directly to the creditors included in the bankruptcy.

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. 

A basic bank account may be available, subject to the bank’s eligibility checks. Choose an account without borrowing facilities and discuss it with your trustee.

Therefore, banks offer a basic account that allows simple transactions.

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Will I lose my house?

If you rent, bankruptcy is unlikely to affect your tenancy when your rent is up to date. However, your landlord may be told about the bankruptcy, and rent arrears or tenancy terms can create problems.

Keep paying ongoing rent. A landlord may still seek possession for rent arrears included in the bankruptcy. If you own a home or have a beneficial interest in one, the trustee may be able to sell that interest or seek a sale of the property.

It might be possible to delay or prevent the official receiver from selling your house if one of the following circumstances applies:

1. Someone else has a legal right to your house.
2. Someone wants to buy your share of the house.
3. 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.

Bankruptcy can put your housing at risk. Contact a housing adviser and your council promptly if you are threatened with homelessness; do not assume that bankruptcy guarantees rehousing.

Take the first step towards tackling your debt

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Natasha

Very helpful and informative thank you

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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.

Bankruptcy normally stays on your credit file for six years from the bankruptcy order.

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
• Check your credit reports and ask for errors to be corrected; you do not need to borrow solely to rebuild a score

Bankruptcy affects some jobs, professional registrations and business roles. Check your contract and the rules of any professional body before applying.

Do not assume that bankruptcy automatically prevents employment or promotion. The effect depends on the role and its contractual or regulatory requirements.

However, with good money management and careful spending, you can rebuild your credit score and live as you normally would.

References

1. StepChange – Credit safety net report