Guide to Bankruptcy

What Is Bankruptcy?

Bankruptcy is a legal status applied to people unable to repay debts, allowing some or all debts to be written off—though certain debts cannot be included, such as student loans, court fines, and debts from fraud. The bankruptcy period usually lasts 12 months, after which restrictions are typically lifted. The minimum debt threshold to be made bankrupt is £5,000.

Where Does Bankruptcy Apply?

This guide covers bankruptcy in England and Wales. The process differs in Scotland (known as sequestration) and Northern Ireland. For those regions, refer to their specific legal authorities.

Alternatives to Bankruptcy

Bankruptcy is generally a last resort. Alternative solutions include a Debt Relief Order (DRO) for people with low income and minimal assets and an Individual Voluntary Arrangement (IVA) for those with regular income, letting you pay back a portion of your debts over several years.

How Bankruptcy Happens

• You can declare bankruptcy yourself if you cannot pay debts.
• A creditor can petition for your bankruptcy if you owe over £5,000.
• An insolvency practitioner may apply if you breach an IVA.

Pros and Cons of Bankruptcy

Benefits:

• Most unsecured debts are written off.
• Creditors can’t pursue further legal action or demand payment.

Drawbacks:

• Significant assets, including your home or vehicle, may be sold.
• It impacts certain jobs and your credit for six years.
• Bank accounts may be closed and bankruptcy is published on government registers.

Assessing If Bankruptcy Is Right

Consult a debt adviser before applying. Consider:

• Costs and fees
• What happens to your assets and income
• The impact on your home and belongings
• If you have explored all alternatives.

Cost of Bankruptcy (2025)

The application fee is £680 in England and Wales. This must be paid before submission—instalments are possible, and some charities offer help if you can’t afford the fee.

The Application Process

Apply online, providing details about your debts, income, expenditures, assets, and bank accounts. You may need to include any enforcement letters or court judgments.

What Happens Next

• An adjudicator reviews your application and will decide within 28 days.
• If approved, you’ll have an interview with the Official Receiver.
• Your assets are assessed and sold if possible. The process prioritizes payment of the bankruptcy administration costs, certain employee debts (if relevant), creditors, then any remaining money is returned to you.

Fees Deducted From Assets (2025)

• Administration fee: £2,390 (if self-applied) or £3,300 (if creditor-applied)
• General fee: £7,200
• 15% of total assets realised
• Distribution and other court-approved fees may also apply.

Exempt Assets

Normal personal possessions and basic household goods are generally exempt, as well as a vehicle needed for work or essential travel, or tools and equipment for your job.

Restrictions During Bankruptcy

Bankrupt individuals face restrictions such as not obtaining credit above £500 without disclosing their status, and being unable to serve as a company director or charity trustee.

Public Record and Privacy

Your bankruptcy will be listed in the Insolvency Register and The Gazette, although your address can be withheld if you are at risk.

What Happens After Discharge?

After 12 months, most debts and restrictions are lifted unless the bankruptcy resulted from misconduct, which may extend restrictions up to 15 years. The bankruptcy will remain on your credit file for six years from the order date.

Car Leasing After Bankruptcy

Specialist providers like CVS Ltd offer personal and business car leasing agreements tailored for those with past bankruptcies, including flexible contract structures.

Useful UK Debt Support Links

• Individual Insolvency Register
• The Gazette bankruptcy records
• Where to find free debt advice (use updated and reputable sources such as Citizens Advice or StepChange).