This page looks at how you go bankrupt: what you have to do beforehand, things to make decisions about, how to complete the online bankruptcy application and how your application will be considered by the Adjudicator. The old process of filling out forms in triplicate and taking them to court ended on 5 April 2016.
This page is written as if you have already taken the decision to go bankrupt and need to know what to do – but one of its main aims is to let you see what will happen if you decide to go bankrupt, so it matters even if you are still thinking through your options. There is a Checklist of things to do when going bankrupt which summarises the points here.
Getting more advice about bankruptcy
Two groups of people should get professional advice on the implications of going bankrupt:
- People with unusual assets, including shares in unlisted companies, rights to a share of a trust fund, unvested stock options, being a member of a partnership.
- People whose assets or debts are in dispute, for example, because of divorce. You need to discuss the possibility of bankruptcy with your solicitor. Don’t just assume your ex can have the house and car because you will be going bankrupt.
For everyone else, you still need to look for more information and advice as this is such a huge decision. Debt Camel suggests that you do as much research on the internet as possible and then get face-to-face advice at a Citizens Advice Bureau or talk to National Debtline on the phone about what is most suitable for you. If you are self-employed or have a limited company, talk to Business Debtline.
Decide what bank account to use afterwards
Most banks will close your current account when you go bankrupt. Opening a new one after bankruptcy used to be a major headache for many people, but from the start of 2016 life has got much easier. Many major banks have introduced improved basic bank accounts, with no fees and proper online access, and made them available to someone who has gone bankrupt. See Bankruptcy – Your Bank Account Options for a complete list.
High bankruptcy fees
It may seem odd that when you have no money to pay your debtors, you have to pay hundreds of pounds to go bankrupt, but that’s the way it is. In England and Wales the bankruptcy fee is £680. When you have decided to go bankrupt, getting these fees should be your top priority:
- You can pay the bankruptcy fees in instalments and use a credit or debit card if yours aren’t maxed out, see How to pay your bankruptcy fees for details
- If you are currently making any payments to unsecured creditors, you should stop making these and put that money towards your bankruptcy fees.
- For more suggestions see getting help with the high bankruptcy fees.
When should I go bankrupt?
The simple answer is that you should go bankrupt as soon as possible after you have decided that it is the best solution for you. Not only is it best to get it over with, so that you can have a fresh start, but once you have realised that you are going to have to go bankrupt you should not borrow any more money because you know you won’t be able to repay it.
Don’t rush into bankruptcy. If everything might look different in a couple of years, for example when your children are at school and you can get a job, then you need a temporary solution to your debts such as a DMP. You can’t change your mind about bankruptcy. (Well technically you can – it can be annulled – but the costs of doing this are huge.) But don’t hang on for years hoping that things will get better if there is little chance of this happening.
Some things may delay your going bankrupt. You may need to save up the fees, see above. If both you and your partner intend to go bankrupt, it might make sense for the person with the largest debts or the most annoying creditors to go bankrupt first.
If you are paid monthly, you may prefer to time your bankruptcy so that it happens a few days after you get paid: this will let you withdraw cash for living expenses and also give time for your work to switch your next pay cheque into your new bank account.
Another good reason to delay is if you are just about to move into a rented property. Although going bankrupt will not prevent you from renting, if your move is imminent you may prefer to do it first rather than possibly complicate it.
You may not lose your house when you go bankrupt but sometimes you don’t want to keep it – perhaps there is a lot of negative equity or the house is wrong for your family. In this case, you want to hand back the keys to the mortgage lender, get the mortgage and any secured loans included in your bankruptcy, and rent somewhere. Because renting privately can be more difficult after you have gone bankrupt, a suggested order of events is:
- save up a deposit and first month’s rent. Do this by stopping all payments to unsecured debts (including your IVA or DMP). You could consider stopping payments to your mortgage and secured loans. This is scary, but it will take months before a lender can get a repossession order;
- rent somewhere, move and hand back the keys;
- save up the money for bankruptcy fees;
- go bankrupt.
Completing the online application
The Insolvency Service summarises the application post like this:
The online application is a lot more user-friendly than the old forms, but it is very long. There are 8 sections and they have to be completed in order, so it’s not easy to see what the whole application looks like or what information you will need. How to complete the online bankruptcy application looks at the process in detail, including where to get some of the information and what to do if you don’t have some details.
Get your paperwork in a bit of order
Whilst you are filling out the bankruptcy application, you may have to dig up a lot of information. It would be a good idea to get this neatly sorted because you will need it to hand for your interview with the OR. Ideally you will have just about everything relating to your finances: bank statements, pay slips, insurance policies, credit card statements, loan papers, hire purchase agreements, receipts for any major purchases, and, if you are self-employed, the last set of your accounts. Don’t worry if you haven’t got all of these, the OR will be used to it. But the better organised you are, the easier the whole process is on your nerves.
What happens next?
Once you have paid your fees and submitted the bankruptcy application, you have to wait for the Adjudicator to determine if your application will be approved or rejected. You may be contacted by the Adjudicator’s office asking something, so do check the email account you put on the application.
The Adjudicator aims to approve 95% of applications within two working days. You will receive an email informing you when a decision has been made and you can then see it by logging into the bankruptcy application. If your application has been approved you will see a copy of your Bankruptcy Order and you are now bankrupt. Time to go and open that new basic bank account!
The Adjudicator will assign your case to one of the Official Receivers around the country within 24 hours. This is no longer always your nearest OR office, it could be anywhere unless it is likely that you will require a face-to-face interview – these are rare for domestic bankruptcies, usually only being needed for people with an actively trading business.
You will be contacted by the Official Receiver in the next few days for an interview, see What happens after you go bankrupt.