“Can I go bankrupt?” is a very common question. People worry that their bankruptcy application will be rejected because their debts aren’t large enough or the judge will say they should repay the money or that they don’t meet the legal criteria.
Some firms who refer people for IVAs prey on these sorts of worries, as this type of advert shows. If you click on it, you are asked to put your details into a calculator. At the end of it you won’t be told whether you “qualify for bankruptcy” at all, that will be ignored! Instead they will try to sell you an IVA.
(By the way “standard criteria for UK citizens” in this particular example is just nonsense because Scotland has completely different rules and procedures for bankruptcy!)
Do I owe too little to go bankrupt?
There is no minimum amount you have to owe in England and Wales. Of course this doesn’t mean that bankruptcy is a sensible option for everyone with problem debts!
If you want to find out whether bankruptcy is a good option for you, visit your local Citizens Advice Bureau or call National Debtline, who also have a factsheet on bankruptcy. By taking debt advice, if you are told that bankruptcy is a good option for you you can be sure that you are “insolvent” and your bankruptcy application will be accepted.
I’ve been told I don’t have enough income!
A reader was told this. It isn’t right – you don’t have to have a budget that balances to go bankrupt, but I suspect he was being told that he needs to sort other things out first before bankruptcy, see Can you go bankrupt with no income? for details.
The alternatives to bankrupcty
If you owe less than £20,000, are renting and have little spare income each month then you may qualify for a Debt Relief Order (DRO). A DRO will wipe out your debts after a year, you don’t have to make any payments to it and the fees are only £90 – a lot less than bankruptcy.
Individual Voluntary Arrangements (IVA) are complicated, long term legal contracts. In an IVA you will make payments for longer than in bankruptcy – 80% of people actually don’t make monthly payments at all. But IVAs have some advantages if you have assets such as a house to protect. If you are renting then they are usually a worst choice than bankruptcy. You should read about IVAs and look at Debt Camel’s page comparing IVAs and bankruptcy as the choice is not always simple.
If you owe less than £5,000 you should check whether you meet the criteria for an Administration Order – these are very rare because you must have a CCJ and owe less than £5,000 but if you do, then go for it!
If you are over 55 and have a pension that you could access, then using this money to repay your debts could be a good idea. You may be able to get full and final settlements which would make this cheaper. If your pensions are large and you can access them, you may not technically be “insolvent” – check this with a debt adviser before applying for bankruptcy. Bankruptcy and Pensions looks more at this unusual situation.
Are you sure my bankruptcy application won’t be refused?
When you submit your online bankruptcy application, it is sent to the Insolvency Service’s Adjudicator for checking. The Adjudicator’s office will be looking to verify the form was submitted by the correct person, that the right “jurisdiction” is used (this is to stop people coming to England just to go bankrupt), that you don’t already have a bankruptcy petition pending, that the debts you have listed weren’t included in a previous bankruptcy petition and to see if you are “insolvent”. Find out more about the new process in How to complete the online bankruptcy application.
Most of these checks will be simple formalities for the vast majority of people applying – the Insolvency Service itself describes having your application rejected as “an unlikely event”.