“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 Official Receiver will say they should repay the money they owe. Or that they don’t meet the legal criteria.
But less than 1% of bankruptcy applications are rejected by the Insolvency Service, so you need to stop worrying and find out the facts.
Contents
The common worries
“A bankruptcy check said I should have an IVA”
Some firms prey on these sorts of worries, see Making Bankruptcy sound scary.
Often they ask you to put in some details of your debts.
The websites that offer this sort of “check” make all their money by getting you to sign up to an IVA. This is not a proper check about whether bankruptcy is a good option for you. And it is certainly not a check that you will “qualify” for bankruptcy.
“Do I owe too little to go bankrupt?”
There is no minimum amount you have to owe in England and Wales to go bankrupt.
A creditor can only make you bankrupt if you owe them at least £5,000. But you could choose to go bankrupt owing less than that… of course that isn’t normally a sensible idea!
If you want to find out whether bankruptcy is a good option for you call National Debtline on 0808 808 4000, who also has a factsheet on bankruptcy.
If National Debtline says that bankruptcy is a good option for you, you can be sure that you are “insolvent” and your bankruptcy application will be accepted.
“I may inherit some money”
You may be worried that your bankruptcy will be turned down because you are named in someone’s will.
If the person has already died and you are waiting to get your inheritance then you should probably not go bankrupt – see the section below on “Do you have a better alternative?”
But if the person hasn’t died, they could change their will and leave it all to the local Cats Home. So this future inheritance isn’t an asset of yours at the moment and it won’t have any effect on your bankruptcy application.
If you are worried that the person may die soon, then read this article on Inheriting Money When Your Are Bankrupt.
Not enough income? Or too much income?
A reader was told they didn’t have enough income to go bankrupt.
It isn’t right! You don’t have to have a budget that balances to go bankrupt. But I think 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.
At the other end of the spectrum, you may worry that you have a good job and you can pay some money to your debts, just not all of it. But you won’t be refused bankruptcy unless you can pay all of your debts. Talk to a debt adviser about whether you have a better option to bankruptcy if you are worried about this.
The reasons some bankruptcy applications are refused
When you submit your online bankruptcy application, it is sent to the Insolvency Service’s Adjudicator for approval.
The Adjudicator’s office will check:
- the right “jurisdiction” is used – this is to stop people coming to England just to go bankrupt;
- the form was submitted by the correct person, not someone pretending to be you;
- you don’t already have a bankruptcy petition pending;
- the debts you have listed weren’t included in a previous bankruptcy petition;
- to check you aren’t over 55 with a large money purchase pension you could access; and
- to see if you are “insolvent” – this is a quick check that you can’t pay your debts now. You won’t be told “You could work for 12 years and clear them in that time so you can’t go bankrupt” – that doesn’t happen.
These checks are simple formalities for the vast majority of people applying.
The Insolvency Service itself describes having your application rejected as “an unlikely event”. It happens to less than 1% of applications. The most common reason for one being rejected is the first one – that the person applying hasn’t lived in this country for long enough.
What happens if a bankruptcy application is refused?
If your bankruptcy application is rejected, you will be sent a Notice of Refusal. This will explain why the adjudicator did not make you bankrupt.
You can ask for this decision to be reviewed by the Insolvency Service. Don’t delay in doing this, but I suggest you should first talk to National Debtline about what to say and the points to make.
If this review still results in a rejection, you can appeal to the court. Again I suggest you need help to do this.
You don’t lose all your bankruptcy fee if an application is rejected. You will receive a refund of £550 – that is the £680 fees less the application costs of £130.
Do you have a better alternative?
The Official Receiver does NOT do a detailed check on whether bankruptcy is a good option for you or if you have a better alternative.
So you have to make sure that bankruptcy is your best option before you submit your bankruptcy application.
Your situation now may feel terrible, after Covid-19 you may have lost your job or seen your business fold. But rushing into any form of insolvency – bankruptcy, Debt Relief Order or an IVA if things may improve soon is often a mistake.
If things may realistically improve, then it is often better look at a temporary solution now. For example you could make token payments of £1 a month. Or if you can pay more, look at a debt management plan. Token payments or DMPs are good temporary plans – they treat all your creditors fairly and interest and charges should normally be stopped so your situation doesn’t get worse.
When there is little chance things will improve, you may still have better options than bankruptcy:
- If you owe less than £30,000, 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 in bankruptcy. IVAs have some advantages if you have a house to protect but if you are renting they are usually a much worse choice than bankruptcy, see compare IVAs and bankruptcy .
- people over 55 may have a pension they could access. 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.
If you think bankruptcy maybe your best option, it is always worth an hour of your time to talk to a good debt adviser about this.
Phone National Debtline on 0808 808 4000.
Bankruptcy – the big questions
A checklist for going bankrupt
Could a Debt Relief Order help you?
Kevin Butler says
Hi.
Great website well done.
As a recent ex CAB MASDAP case worker, can I just suggest that there may be a few occasions where Bankruptcy may be better than a DRO.
1. If a person doesn’t know all of their creditors and / or is close to the DRO limit, Bankruptcy will capture all qualifying debts even if they are not on the bankruptcy form whereas under a DRO, the client may either still be liable for those debts that may subsequently surface, or in the worst case, if those debts not listed on the DRO application do surface and take the total qualifying debts over £20k, then the DRO could be revoked.
2. If a person is expecting a change of circumstances in the next 12 months that could potentially mean they no longer meet the DRO criteria, usually an increase in income, then whilst the DRO could be revoked and back to square one, bankruptcy could just see them with an Income Payment Order.
3. If someone has made a preferential creditor payment in the last two years, A DRO could be refused whereas more consideration would be given under bankruptcy and you can remain bankrupt albeit with a potential consequence of a bankruptcy restriction order or a reversal of the transaction.
Having done DRO’s since they started, I would occasionally come across a client who preferred the certainty of bankruptcy over a DRO but most importantly, had the availability of help with the fee.
Lastly and unfortunately, due to the current high demand for the services of a qualified DRO intermediary, Bankruptcy can be undertaken more quickly if the client has the money available; for some and especially where bailiff action is involved, time can be an important factor and at the County Court in York, bankruptcy hearing waiting times were always around a week.
I am now working for a Housing Association, still in the field of money and poverty and will happily refer our residents to your website for clear explanations of technical issues. Best wishes.
Sara (Debt Camel) says
Thank you Kevin – for the kind words as well as the detailed comment.
You are of course right that there are times when bankruptcy is better – I do assume that the DRO intermediary will point them out!
overnightBR says
Hi. Very well laid out information , simple and to the point. Really great.
Question:
Can I apply for bankruptcy even though I have not yet missed ny payments or defaulted on any debt?
I am self employed and very recently had a very serious health situation which means I have within the space of a month lost my 2 clients permanently. I can no longer work in my field as my health will only deteriorate furher.
I had just taken 2 large loans to carry me through the year just before my health collapsing.
So i can afford to make payments on my debts for another 2 months, maximum 3. After that I will be making barely enough to meet essential living costs. Absolute essential only.
So, can I apply for bankruptcy given that I have not missed any payments or defaulted on any debt? I just dont see why I should be going through the stressful process of defaulting, and letters and calls, and debt collection agencies when my financial situation basically collapsed almost overnight.
Thank you for your reply in advance
Sara (Debt Camel) says
Thanks for the kind words about Debt Camel :)
The simple definition of “insolvent” is that you are unable to pay your debts as they fall due ie you will not be able to make the normal repayments to the debts in the next month. You don’t have to have defaulted already or tried to negotiate with debt collectors for lower payments and failed.
If you clearly have enough money in the bank to get you through a few more months, then it’s theoretically possible that the adjudicator might decide you weren’t insolvent and so couldn’t go bankrupt. But if your only income is from benefits (is it?) and you owe a lot of money with large repayments each month, then the adjudicator is unlikely to spend a lot of time with a calculator working out that you could probably scrape by for another month before you are totally broke.
Of course you would also have to pay the bankruptcy fees, so that would be a sizeable chunk of money – you don’t want to wait until you have no money for the fees !
In your situation I suggest you talk to Business Debtline https://www.businessdebtline.org/ about bankruptcy. You may well be right that it is your best option. But this is a very big decision and it’s worth making sure. And BD can also talk about when you should go bankrupt if that is indeed your best option.
overnightBR says
Thank you for your reply.
When i read your sentence that BR is a ‘very big decision’ I must admit it makes me nervous. I totally understand the process, the restrictions and effect on credit. But is BR something that we should be afraid of? Isn’t it there for this purpose, ie when you cannot possibly service your debts anymore? My credit would be enormously damaged anyway by the default which would be registered in a few months?
Unless I am missing something ofcourse. What would you say is the main advantage of letting defaults happen and register and then potentially/inevitably deal with CCJ’s? Would that be a viable option if one is able to deal with that process? Is it viable to to go through that and then present to the judge at the CCJ the best you can afford?
thank you once again
Sara (Debt Camel) says
Bankruptcy isn’t something to be afraid of if it’s the right solution for you. There is absolutely no advantage in letting defaults happen. I am not suggesting waiting 6 months UNLESS there is realistic chance your health and employment situation might improve.
I’m talking about
a) discussing your general situation with an expert as a way to confirm you are doing the right thing and haven’t missed anything important (honestly this is worth an hour of your time)
and
b) talking about whether to go bankrupt this month, next month or the month after.
overnightBR says
Hi Sara. I comletely understand the getting expert advice part and I will do that soon. Bedridden at moment.
I have read in forums some people saying that they chose to not bankrupt themselves. Rather they just went through the process of defaulting and dealing with the CCJs and offering what they can and just making those minimal payments for years and years and they seem to be happy with that option. Just curious under what circumstances that may be a better option to bankruptcy?
I can think of possibly if you own your own home and assets? am I right?
thank you again
Danielle says
Hi. I’ve been struggling with debt for years. I should have bitten the BR bullet years ago but never. It’s gotten so bad that I have bailiffs on my case for council tax, ccjs for water and 2 old debts. And my council rent aren’t happy with how quick I am paying my arrears off so want to take me to court for repossession.
I have a part time job, 3 kids. No assets at all. The most expensive thing I own is a £120 TV.
I’ve filled in my br form online. My problem is it is going to take me months to pay the fee. I am going to cab Monday to see if they can help with charis grants form.
My question is. (This is now out of control but as you can see I’m stuck in Limbo). Is there anything I can do in the mean time to hold the creditors off? It’s not nice bailiffs coming but I literally own barely anything. I’m assuming they won’t take a year word of what I say until I’ve filed my bankruptcy and paid fees?
I am also panicking as I had last week off work due to a hospital operation and I only received £35 ssp today. So this week I can’t afford to pay my rent, let alone the arrears payment. And it’s so serious it won’t go in my favour.
Thanks
Sara (Debt Camel) says
You also need to talk to CAB about your benefits situation and your rent arrears. They can also talk about dealing with bailiffs, which in your situation usually means not opening the door to them ever – if you own a car it needs to be in a locked garage or a long way away.
Dee4378 says
Hello
Just a quick question, I am currently frantically saving to get the fee for bankruptcy together, however in the meantime i will need to surrender my car to the finance company I’d rather voluntarily surrender than have them forcibly remove it as I understand this will be the cheapest option, I will still owe the finance company money even after the car has gone but this will be a less than what is still owe on finance, can this still be included in the bankruptcy?
Sara (Debt Camel) says
If you go bankrupt, the amount you still owe on car finance will be included in your bankruptcy. That means there isn’t much point in trying to minimise it, it is all going to be wiped out whether it is £2000 or £5000 doesn’t make any difference.
HAve you taken some advice on going bankrupt? That is always a good idea, even if you are sure it is your only option, it’s worth spending a small amount of time to have this confirmed by an expert.
dee4378 says
thank you, yes I’ve had advise and this is the only reasonable option as I have no assets and debt of approx. £ 45k I’ve made an application for payday loan refund and hopefully if this goes through I will be able to pay the bankruptcy fee within the next 8 weeks
Sara (Debt Camel) says
That sounds like a sensible plan – best of luck with the payday loan refund!
Steve says
Can anyone declare bankrupt even if they could pay 200 a month towards debts but would take 20 years to pay them off?
Sara (Debt Camel) says
You can go bankrupt if you can’t repay your debts as they fall due. If you aren’t sure about this, I suggest you talk to National Debtline on 0808 808 4000. they can say if bankruptcy is a good option for you and what other options you might have.
Rafier says
Hi I have a few questions I would like to ask. Talked to stepchange they told me bankruptcy it’s an option for me. I have a large debt and moved back with my parents so I don’t have any assets or income will bankruptcy be accepted? . In the application income and expenses section most sections don’t apply to me as everything will be paid by my family including mobile phone bills. Should I leave everything blank isn’t that suspicious ? Also I’m planning to go bankrupt soon but decided to open a new basic account with a bank. The new account should arrive in 5 working days so I don’t know the details yet should I just put my current bank account details I have now and not mention the new one I opened on the application as I still don’t have the details and was planning on going bankrupt tomorrow? I live in an area with a really bad signal after the bankruptcy is issued when will the OR contact me by phone and what happens if I have no signal and miss the call is there a way to know exactly when they will call?
Sara (Debt Camel) says
If Stepchange say bankruptcy is an option for you, your application should not be rejected.
HAve you applied for Universal credit? If so, say that on your application. But it’s not a question of what looks “suspicious”, your application needs to reflects the facts of your situation.
Your new account is not yet open so doesn’t need to be listed.
Most OR interviews are by phone. you can ask for one in person or arrange to use a landline?
Rafier says
Thank you I got it. Also would like to ask you what should I put in the creditors address on the bankruptcy application? I called banks and they don’t seem to know, some say put your local branch others say put correspondence address and I read somewhere to put the home office registered address instead. My creditors are Nationwide, Barclays, Tesco Bank, Halifax. And lastly where it asks for an account/reference number can I put my credit card number? Thanks for your help.
Sara (Debt Camel) says
It doesn’t really matter – anything sensible will do for the address and the reference number. these addresses are more important if you owe a small local firm money, not for a big bank
Rafier says
Thank you okay for the reference/account number I will put my credit cards number then. Okay one last question I promise. If before I go bankrupt I take all the money I have in my main bank account (around £1000) and put it on a new basic account will the OR take that money? Or will the OR need to know if I put it in my new basic bank account? Or what if I take the cash out? Thank you.
Daniel says
Hi- if I make an application for bankruptcy and it is denied, would I get the money back I pad for the application? Thanks.
Sara (Debt Camel) says
The fee is made up of a £130 adjudicator fee and a bankruptcy deposit of £530. If your application is refused, the deposit is returned to you but not the adjudicator fee.
BUT only a tiny number of applications are refused. If yiu have taken any advice on going bankrupt eg from National Debtline -and they say it is a good option for you then you don’t need to worry about your application being rejected.
Annemarie Davies says
Hi. I have a lot of credit card and catalogue debts, I am currently being taken to court by the council for a notice of improvement charge of £20,000. Which I thought I had paid by selling my house. I own my car with no outstanding monies owed on it. Would going bankrupt clear the debt to the council and would my car be took off me? Thank you for your help.
Sara (Debt Camel) says
So you are renting at the moment? Can you say what the credit card and catalogue debts add up to?
How much is your car worth?
Jo says
Sorry to post here, I have two basic bank accounts due to having bad credit rating in the first place. Will this account be closed and the money taken once I have applied for the bankruptcy? I’m worried I’m going to send in the application and then have a bunch of money taken and won’t be able to afford rent/food/living expenses
Sara (Debt Camel) says
This article https://debtcamel.co.uk/bank-accounts-after-bankruptcy/ looks at the issue of basic bank accounts.
If the money in your accounts is needed for daily expenses, the OR is very unlikely to claim it. The accounts may be frozen but that is normal yy only for a few days. Many people like to time their bankruptcy application so it is just after their rent is paid. You should cancel all DDs or STOs to debts as you won’t be paying them after bankruptcy. And take out enough cash to get you through a couple of weeks.
Have you taken advice on going bankrupt? If not, do talk to National Debtline on 0808 808 4000. Even if you are convinced that bankruptcy is the best option for you this is worth talking through with an expert… and they can also talk about practicalities such as timing and bank accounts.
J says
I’m loving this site. It’s answering alll the questions I had about bankruptcy. Thank you so much! I’ll still be ringing Step Change in the morning for my own personalised advice, but you’ve really set my mind a rest about going bankrupt now. Thank you ☺️ thank you 🙏
Jue says
Can a person go bankrupt after doing a DRO 3 years ago
Sara (Debt Camel) says
yes you can. You can only have 1 DRO every 6 years. But you can go bankrupt whenever you need to.
Please take some debt advice about your options. Bankruptcy may be your best chopice but it is always worth an hour of your time to talk things through in detail with a good debt adviser. Phone National Debtline on 0808 808 4000.
Ahmar says
Hi Sara,
My debts are out £ 160 K coming from 2005 but they are not stature barred . As at some point I enter into debt management. There are some debts which is in my and my wifes name , I am in touch with step change and the option I habd chosen is to file bankruptcy. The problem is three are debts about £ 60 K which has been closed by debt management company and they are saying that they are not going to sell these debts and I dont owe anything to them . My first question is about joint account, do I have to mention while filing bankruptcy that it is a joint account as on the online form I am unable to find this as the debts I am entering , it reads enter all the debts including joint debts.
Second important question is do I have to include those debts on which debt collection agency is saying that the balance now is zero.
Your kind advice would be much appreciated
Sara (Debt Camel) says
Can you say some more about the 100k of other debts? What sort of debts were these? have they all been sold to debt collectors?
My first question is about joint account
Do you mean a joint bank account? or a joint loan?
Does your partner also have debts?
Ahmar says
Hi ,
Many thanks for your kind reply. All these debts has been sold to debt collection agencies, some are gone and some have sold their debts to other debt collection agencies. Out of £ 160 K debts, some of the collection agencies has closed my debts for about £ 60 k so I left with about £ 100 K , £ 60 K of the debts by debt collection agencies assured me over the phone that these are closed and they are not going to sell it to anyone. So do I have to disclose these debts which has been closed. Do ineed a letter from them if I am not including in my bankruptcy.
Joint account means we are on universal credit and in past we had mortgage in joint name which has been repossessed about 13 years back so I intend to include that debt in full in my name as the same debt than will be owed by my wife this is the only joint account we had that is mortgage.
Yes my partner also has debts but we do not have sufficient funds to file bankruptcy at one go , hence I intend to file first.
All these debts are non priority debts.
Please advise your suggestion as step change do not have the right answer for these.
Looking forward for your reply and kind cooperation
Sara (Debt Camel) says
I am still unclear why you think a joint account is a problem for a bankruptcy application. I think it would help you to talk to National Debtline about this – phone 0808 808 4000.
I would list all debts, even ones the debt collector has said they will not pursue. There is no downside to doing this.
Kathleen says
Hi, loads of info but I cant see anywhere, if my bankruptcy is refused and I apple for a review, do I lose all the money or will I still be refunded the £550.
Sara (Debt Camel) says
If you ask the Insolvency service to review your rejection, you should still get the fee refunded if they don’t change their mind.
Are these vague worries? Or do you have a specific reason why you think your application may be rejected? Rejections are VERY rare – have you taken debt advice about bankruptcy?
Kathleen says
Hi Sara,
Thank you for your reply.
I have been refused. Apparently my interest lie outside England/Wales. I’ve been on lockdown over a year. My situation is dire.
Sara (Debt Camel) says
I am sorry to hear that.
I see you aren’t in the UK at the moment. See https://www.nationaldebtline.org/fact-sheet-library/bankruptcy-and-foreign-issues-ew/
You can phone National Debtline from abroad on +44 121 227 4780 or use their webchat which is very good – you talk real debt advisers.
Stardust says
Hi! Thanks so much for all your useful info. I am in an unusual situation and would be grateful for some advice.
I have credit card debts of approx £24k. I do not use them any more and pay on time and above the minimum to try to clear but they are hardly going down. They are long-standing and my largest now classes it as persistent debt and recently raised the min. payment even higher.
In Sept I will start a medical degree and get little to no funding to support myself and will have little time to work. I will not be able to manage the £600 monthly repayments. I’m considering going bankrupt as my situation is unlikely to change – I own no assets, have no savings and live with family since lockdown.
The issue is when I need to apply for rented accommodation in September- if I go bankrupt now, I will still be in bankruptcy then and I won’t pass a credit check with any letting agent. Should I wait until September to apply for bankruptcy, after finding a new home, or will that affect my prospective housemates’ credit through the address? I’m also worried about how this will affect my ability to get a mortgage in years to come but tbh that’s the least of my worries right now!
Any advice would be welcome, thank you.
Weatherman says
Hi Stardust!
I would suggest speaking to a debt adviser about all this – call National Debtline on 0808 808 4000 – but I hope the info below is helpful. The university might also have a housing officer who can advise on e.g. landlords or letting agents who might be willing to consider you as a tenant even if you’re an undischarged bankrupt.
If you go bankrupt (or get a DRO or an IVA) during a tenancy, it’s possible you’ll lose your tenancy. Private tenancies in particular often have & will use a clause saying the tenancy is void if you get a formal debt solution. And if this happens, you might be classed as ‘intentionally homeless’ by the council, so also not be eligible for help from them. However, some landlords will agree not to use this clause even if it’s in the agreement – especially if you explain to them beforehand.
Going bankrupt at any point won’t hurt your housemates’ credit – you’re not ‘financially linked’ unless you have a joint financial product together, like a bank account.
As for your credit cards, you can (& I think should) tell them you can’t afford to keep paying, and ask them to freeze interest and charges, or even write off some/all of the debt, whether or not you choose to go bankrupt. There’s also more information on ‘persistent debt’ in particular here: https://debtcamel.co.uk/credit-card-pay-more/
I hope that’s helpful, and good luck!
Sara (Debt Camel) says
In addition to what Weatherman has said, it is also possible that in a few months you may be able to have a Debt Relief Order – a sort of easier for of bankruptcy. At the moment there is a 320,000 debt limit on this but it may be increasing to £30,000. National Debtline can talk about it.
People that let to students often ask for a guarantor – is there someone in your family that could provide that? In that case the landlord may not mind if you are bankrupt or in a DRO.