Bankruptcy in the UK: The Basics

In England and Wales, individuals apply for their own bankruptcy online through the Insolvency Service's adjudicator service. You no longer need to go to court — the process is handled administratively. The application fee is £680, which must be paid before submitting your application. The fee cannot be waived, but you can pay it in instalments over time before submitting.

The application requires you to provide detailed information about your debts, income, assets, and outgoings. You must disclose all assets honestly — failing to do so is a criminal offence. The adjudicator reviews the application and, if satisfied that you are eligible, makes a bankruptcy order. This typically happens within 48 hours of a completed application.

Once the bankruptcy order is made, your case is assigned to the Official Receiver (OR), a civil servant who investigates your financial affairs. In more complex cases, or where there are significant assets, a licensed insolvency practitioner may be appointed as trustee in bankruptcy. You must cooperate fully with the Official Receiver — provide all information requested, hand over assets that form part of the bankruptcy estate, and attend any interviews required.

You can also be made bankrupt by a creditor who is owed at least £5,000 — they issue a statutory demand and, if unpaid, petition the court for a bankruptcy order. However, most bankruptcies are debtor-led.

The most significant benefit of bankruptcy is automatic discharge, which occurs 12 months after the date of the bankruptcy order. On discharge, you are released from most of your pre-bankruptcy debts — they are legally extinguished and creditors cannot pursue you for them. You also regain the freedom to apply for credit (though your credit file will record the bankruptcy for six years).

Discharge is automatic — you do not need to apply for it or do anything to trigger it — unless the Official Receiver has applied to extend the bankruptcy period (which is unusual and only happens in cases of non-cooperation or dishonesty).

Certain debts survive discharge and remain payable after bankruptcy ends:

• Student loans (Income Contingent Repayment loans)
• Child maintenance arrears
• Court-ordered fines and confiscation orders
• Debts incurred by fraud
• Personal injury claims arising from your negligence
• Certain Social Fund loans

Secured debts (mortgages) are also not discharged — you must either maintain payments and keep the property, or the property will be sold as part of the bankruptcy estate.

Automatic discharge after 12 months does not always mean all restrictions end. If the Official Receiver finds evidence that you behaved dishonestly, recklessly, or in breach of your obligations as a bankrupt, they can apply to the court for a Bankruptcy Restrictions Order (BRO), or accept a voluntary Bankruptcy Restrictions Undertaking (BRU) from you. A BRO or BRU extends the restrictions of bankruptcy for between 2 and 15 years beyond discharge.

Conduct that may lead to a BRO or BRU includes:

• Concealing assets or debts from the Official Receiver
• Making fraudulent transactions before bankruptcy (selling assets at undervalue or giving them away to avoid their inclusion)
• Incurring debts without reasonable expectation of repayment
• Gambling or speculation that contributed to your insolvency
• Failing to keep or produce adequate business records

During a BRO or BRU you are still subject to the standard restrictions of bankruptcy — including the ban on being a company director and the requirement to disclose your status when obtaining credit over £500.

Bankruptcy has significant and lasting consequences. Before applying, it is essential to understand what they are and whether an alternative solution might be more appropriate.

Main consequences:

• Your credit file records the bankruptcy for six years from the order date — affecting mortgage applications, credit cards, and loans.
• Your home may be sold. The trustee has an interest in your share of the property. If there is equity, they can apply to sell it. If your partner or children live there, the trustee must wait at least a year before applying for possession, but after that the court will usually order a sale unless there are very exceptional circumstances.
• You cannot act as a company director, be involved in promoting a company, or hold certain professional or public positions while undischarged or subject to a BRO/BRU.
• You must inform any lender of your bankruptcy status if seeking to borrow more than £500.
• Certain employment contracts may be affected — check your contract and consult your employer if unsure.

Bankruptcy may suit you if: you have significant unmanageable debt and no realistic prospect of repaying it; you have few assets (or assets already subject to mortgage); and you are not a company director or in a regulated profession.

Alternatives to consider: If your debts are under £30,000 with minimal assets and low surplus income, a Debt Relief Order (DRO) is faster, cheaper (no fee as of April 2024), and has similar effect. An IVA may be better if you have significant assets or income that creditors should receive. Always seek free debt advice before deciding.