Most people find going bankrupt is stressful. Although afterwards it is usually much easier than you have expected, at the time there seems to be so much to get right.
Here is a checklist, covering everything you need to do before submit your bankruptcy application.
The good news is that this is now all much simpler than it used to be. A few years ago you had to go to court with three copies of very long paper forms and “petition” to have your bankruptcy accepted. Now it’s all online and the whole process feels more friendly and under your control.
Early stage planning
1. Get some debt advice!
Even if you are sure bankruptcy is your best or your only option, do talk this through with a debt advisor.
This is a bad decision to get wrong. However simple you think your case is, it is worth 30 minutes of your time to check with an expert such as National Debtline to see if you have any better alternatives.
If you are self-employed or have a small limited company, contact Business Debtline who can talk about how your business may be affected.
2. How to get the money for bankruptcy fees
£680 is often a very large amount for some who is in such financial difficulty that they need to go bankrupt. Read Where to Get Help With Bankruptcy Fees if you don’t have that sort of money in your bank account – that has lots of ideas to help.
Don’t let this put you off if bankruptcy is your best option. Going for an IVA now because it sounds quicker is going to trap you into paying much, much more over a longer period. And with more than 30% of IVAs failing, you may be back looking at bankruptcy again in a couple of years.
If it is going to take many months to get the money together, start now – you can pay by instalments (see below) and get the money back if you decide not to go ahead with the application.
3. Your housing
If you are renting and need to move soon, it may be easier to rent somewhere now, before you go bankrupt.
If you have a mortgage and you know you are going to lose the house in bankruptcy (this doesn’t always happen! Talk to a debt adviser about whether it’s going to be possible to keep the house!) when you move is a question of convenience:
- you may want to stay in your house and move after you go bankrupt – any mortgage arrears will still be wiped out by your bankruptcy;
- or you may prefer to stop paying the mortgage now, to let you save up a deposit to rent someone, then move out, hand back the keys and then go bankrupt.
4. What bank account will you use?
You don’t need to worry that you won’t be allowed to have a bank account after you go bankrupt.
All the major banks have Basic Bank Accounts, and you can’t be refused one of these because you are bankrupt. So do your research now to decide which account you will apply for, see Bankruptcy: Your Account Options for more details.
It is usually easier to wait until after your bankruptcy order is made and then open the new account because if you open one now it could be frozen when you go bankrupt – which spoils the point!
5. Getting through to the point when you can apply
If it’s going to take some time before you can go bankrupt – perhaps you want to wait for a divorce settlement, or you need to move first, or you have to save up the fees – then here are some tips to help you get through this period:
- try not to use any more credit. Using your credit card to put some petrol in your car isn’t a problem, applying for new credit card isn’t a good idea.
- it’s good to treat all your unsecured creditors the same. It’s fine to keep paying important debts such as tax debts, rent arrears, council tax arrears, car finance and ones where there is a CCJ. But it’s not good to be paying a relative a hundred pounds a month when your creditors are all getting nothing.
- don’t tell your creditors you are going to go bankrupt. They are unlikely to be sympathetic and some may decide this is their last chance to push you to pay them.
- don’t be worried by threats of court or bailiffs. It really doesn’t matter if you get a CCJ when you are going bankrupt in a few months – the CCJ debt will be wiped out. And bailiffs are like vampires, you have to invite them in – so don’t open the door is usually the best advice! It is VERY rare that they can force entry – see Bailiffs – do you have to let them in?
If you are unsure of any of this, talk to a debt adviser such as National Debtline.
If you are worried you might get a Bankruptcy Restriction Order (these are quite rare!) talk to a debt adviser about this too.
The application itself
6. Get info for the application
Read How to apply for bankruptcy online and note what info you don’t have to hand (addresses of creditors, value of your pension, details of your expenses etc) and get these together.
You don’t need to talk to all your creditors before you do this. It’s not essential to have the exact amounts of the debts correct, and it doesn’t matter if a debt has been sold to a different debt collector.
And it’s reassuring that if you forget a debt, it will still be wiped out by bankruptcy. But it’s good to get a complete list if possible as when you have gone bankrupt the insolvency service will tell the creditors you have listed on your bankruptcy application so you won’t have to tell them yourself.
7. Create an application with the Insolvency Service
This is easy to do by entering your email address and 3 security questions here. You will then be emailed your application number so you can start the application.
8. Complete the application
This doesn’t all have to be done all at one sitting, you can save and return as often as you want.
If you start one early, it’s a good idea to read it all through just before you submit it to check nothing important has changed or got missed.
9. Pay the bankruptcy fees
You can pay online by credit or debit card or in cash at a bank.
You can also pay by instalments, see How to pay your bankruptcy fees for details. You have to have paid the full amount before submitting the application.
10. Pick a date and submit the application
When 8 & 9 are done you can submit the application.
You choose which date to put in your application. Most applications are approved very quickly, so you should assume the actual date of your bankruptcy will normally be 1-3 working days later.
If your rent/mortgage is paid just after your payday, then a few days after that is can be a good time to aim for. This lets you pay your most essential bills and take out some money in cash before you go bankrupt, enough to get you through if your bank account is frozen for a few days. But often there is no very convenient time.
You will be sent an email when the Adjudicator has made a decision, this is usually within 1-2 working days. Then you can then login and see a copy of your bankruptcy order – you are now officially bankrupt!