Bankruptcy has many disadvantages but it is over quickly – only a year. If you go bankrupt, your debts will be wiped out with only a few exceptions, the most common being student loans. It gives you a new start to rebuild your finances, an escape from an unmanageable debt situation.
This Guide to Bankruptcy provides information so you can:
- make the right decision about whether bankruptcy is your best option; and
- find out the real facts about what happens after you go bankrupt.
There is a lot of detail here – start by looking at the links in orange if you want an overview.
Contents
Concerns about going bankrupt
Bankruptcy – the Big Questions covers the most common worries that people have, such as will you lose your home? your car? your job? can you ever get a mortgage afterwards? who will be told that you have gone bankrupt?
Other worries you may have include:
- what types of debts are included?
- can you continue in business after bankruptcy if you are self-employed? Most people can, but contact Business Debtline for specialist advice about this.
- will my bankruptcy be approved?
- living abroad and want to go bankrupt?
- is it OK to spend backdated benefits before going bankrupt
- might you get a Bankruptcy Restriction Order (BRO)? Find out why a few people get a BRO and whether one would make much difference to you.
- do you have to tell the OR about all your expenditure? You may be asked questions about expenditure before you went bankrupt but don’t normally have to report on what you spend your money on after you go bankrupt.
- what might the Official Receiver take? looks at concerns about your possessions – most people don’t lose anything!
- what can the Official Receiver make you do? looks at concerns about being told how to live your life – might you be made to move, stopped from changing jobs? etc The answers are almost all “no”.
- is your pension safe in bankruptcy? for most people the answer is Yes your pension is safe.
- is a new partner’s house safe if you go bankrupt? yes – find out the facts.
Myths about bankruptcy
There is a lot of poor, incomplete or just plain wrong information around about bankruptcy on the internet and social media.
Much of this comes from people who will make money if you decide to choose an IVA instead of bankruptcy. Here are some examples of misleading or incomplete information.
One reader put off going bankrupt for a long while because she was worried by what she had heard. Here is her honest account of what it was really like for her: “Why I had to go bankrupt & how it went”.
Preparing for bankruptcy
The process of going bankrupt gives an overview, including what you will need to put on your bankruptcy application. For more details see:
- help with the high bankruptcy fees – this covers your options for getting the money together.
- how to pay the fees – this looks at the mechanics of how to pay them when you have the money. This can be done by instalments.
- how to fill in the online bankruptcy application – it’s long but it’s not difficult, so find out what information you will need.
- your bank account options – you may need to change bank accounts. This link is kept updated with a list of accounts that you are allowed to have when you are bankrupt.
- a checklist for the application process – knowing what you will need may make it all a bit easier.
After you go bankrupt
A Timeline for Bankruptcy shows what happens when.
What happens after you have gone bankrupt summarises when you will be discharged, what restrictions will apply before your discharge etc.
You will have an interview with the OR. This is usually over the phone but you can ask for a face-0to-face interview if you find the phone difficult. You may be interested in this account by a Debt Camel reader which goes into some details about her OR interview: “Why I had to go bankrupt & how it went”.
The Official Receiver will decide if you have enough surplus income to make monthly payments, this is called an Income Payments Agreement (IPA). Most people who go bankrupt do not have to make any payments. If you do, the payments will last for three years, but they are flexible so if your situation changes they can be reduced or increased.
Some more detailed articles:
- who should you tell after going bankrupt? – you don’t have to tell anyone, but sometimes it can be helpful if you do;
- what happens if you forgot to list a debt on your application? – it’s usually OK, the debt will be included in your bankruptcy anyway, but check the details;
- should you get a new job? Or work overtime? – possibly not if you have an IPA or you are undischarged.
- taxes and bankruptcy;
- repossession after bankruptcy – what you should, and should not, do if you want to hand back the keys;
- inheriting money when you are bankrupt;
- will the Official Receiver take your redundancy money?
When does your bankruptcy end?
Almost everyone is discharged from bankruptcy after a year:
What happens when you are discharged? This is the end of your bankruptcy and your debts in your bankruptcy are wiped out. the small number of people who have to make monthly payments will have to carry on making any IPA payments for the rest of the three year IPA period.
How to repair your credit record after bankruptcy The credit repair process can start a few months after you are discharged, but the bankruptcy marker will remain on your credit record until six years after you went bankrupt.
The alternatives to bankruptcy
Even if your debts are clearly impossible, you may still have other debt options::
- IVA or bankruptcy – IVAs were designed for people who can’t go bankrupt because of their jobs or who have assets to protect. They take longer than bankruptcy and will cost you more in monthly payments, but if there are reasons why bankruptcy won’t work for you, an IVA could be a good alternative;
- a long DMP or bankruptcy – bankruptcy lets you put your debt problems behind you, and it is often better than being stuck in debt management for a long while;
- a Debt Relief Order is better if you qualify – a DRO is cheaper, easier, and quicker than bankruptcy, so if you are renting and your debts are less than £30,000 see if you meet the other DRO criteria;
- selling the house it may be possible to keep your house after you go bankrupt if there is no equity or someone else can “buy” your share of the equity from the Official Receiver. But so think if it would be better to sell the house, especially if it is the wrong size, in the wrong place, your mortgage is interest-only or there is an expensive secured loan.
Even if you are sure bankruptcy is your best (or only) option, it is still good to take some advice about this, see Where to get help and advice for suggestions.
Is a creditor threatening bankruptcy?
This guide has assumed that you are deciding to go bankrupt. It is also possible for a creditor to make you bankrupt – this is rare but if you receive a Statutory Demand you cannot safely assume that your creditor is bluffing and ignore it. In particular, HMRC and local councils can and do make people bankrupt because of tax debts. If you have assets such as a house, if a creditor makes you bankrupt you may end up incurring tens of thousands of pounds of costs to get the bankruptcy annulled.
If you think a creditor is seriously threatening bankruptcy, or if you receive a Statutory Demand, you need legal advice fast – go to your local Citizens Advice, a local Law Centre or a solicitor who has experience of personal insolvency.
Andrew says
Hi
I have car finance with Moto Novo and have been recently declared Bankrupt I rang Moto Novo up and told them and they said I have to send the car back as its company policy when insolvent to have car returned.
I have only had the car a year so not paid 50% off and can not find funds to do so. I asked if I could continue payments and keep the car but answer was no even though payments are up to date and never late. They said I could volunteer to send the car back myself and they would sell car and deficit would be written off by the Bankruptcy.
What would be best me return the car myself voluntarily or wait till they could themselves repossess it I suppose when I miss 2 payments they even cancelled the Direct Debit as soon as I rang them.
Sara (Debt Camel) says
Did you take advice on going bankrupt? Because you should have been warned that this is was a possibility with any of the forms of insolvency – bankruptcy, IVA or DRO.
Can you manage without a car?
Andrew says
Hi
No unfortunately I didn’t take advise regarding the car but I have use of another car that my wife has bought after we where told that the Finance company wanted it back.
Would it be best to just return the car ASAP as requested by them via a voluntary return request ? they have sent me a form to sign but would that be a new agreement or a deed of acknowledgment admitting acceptance of liability for the debt. Then it would not be written off with current my Bankruptcy
Sara (Debt Camel) says
If a car is essential for you, you should still be able to include the insurance, petrol, servicing costs etc as expenses even though it is owned by your wife.
The Motonovo form isn’t a new agreement, it is a termination of the old one (I assume… read it carefully… that’s what it should say).
On one level it’s doesn’t matter what you do, the resulting debt will go into your bankruptcy. I would suggest it’s best to sort this out asap so you can cancel the insurance and not have two sets of car costs.
If you are still unsure, talk to your OR’s office.
Andrew says
Hi Sara
Thank you so much for your help
The Moto Novo form reads as follows
RE: AGREEMENT NO:
GOODS MAKE AND MODEL: SUZUKI, SWIFT HATCHBACK
REGISTRATION NO:
I request to surrender the above vehicle to yourselves so that it can be sold at auction and the sale proceeds credited to the agreement to reduce my liability to you.
I understand that any shortfall liability may be included in my bankruptcy after the vehicle has been sold.
Sara (Debt Camel) says
that looks fine
Andrew says
Thank you so much for your help site and yourself have been an enormous help.
P says
Hi,
I made my self bankrupt in 2004. I’m currently struggling with credit card debt.
How would I be treated the second time?
Thanks.
P.
Sara (Debt Camel) says
I think that sounds like very old history. Not sure the Official Receiver will be at all interested in it.
But since then there is a new insolvency option – a DRO. See https://debtcamel.co.uk/debt-options/dro/
I suggest you talk to National Debtline on 0808 808 4000 about your options and the pros and cons. Don’t assume they are the same as 20 years ago.
Simon says
I live with my partner. Up until a year ago, the house was in joint names with her ex-partner. We’ve been together for about 9 years, I’ve lived in the house for about 8 years. I pay my partner money towards board and bills. I’ve never made any direct payments towards the property or paid for any home improvements. Our intention is for the property to be left to my partner’s three children (one is mine). A condition of the re-mortgage was that I had to sign a waiver clarifying that I had no interest in the property.
If I were to go bankrupt, do you think there would be an issue with the house?
Sara (Debt Camel) says
The remortgage was into her name alone?
Simon says
Yes, absolutely.
Simon says
I think it’s only just updated at the land registry. Definitely her sole name. I have no interest in it – legally, equitably or figuratively. Quite the opposite, in fact.
Lisa says
Hello, I wander if you can help with my query, I was declared bankrupt 19/11/2019 and one of the debts i had included was an Amigo loan, i havent heard anything from them since 2019, However my guarantor has (my mum) who has made a claim against them regarding affordability checks but still not heard anything. Yesterday 7.9.23 i received a letter from Lantern debt recovery who has bought the debt from Amigo’s insisting i owe the full amount and need to put a payment plan in place. Can they do that? or do i just supply them with the bankruptcy details? i paid the bankruptcy for 3yrs which final payment was 23.12.2022. this has absolutely devastated me as my credit score is starting to increase and i am worried all my hard work to improve is going to affect this. the loan is showing as satisfied on my credit file also?
Sara (Debt Camel) says
No they can’t. Just sent Lantern your bankruptcy details.
The loans should show as satisfied or partially satisfied.
Was your mothers claim based on her not being able to afford the loan or you not being able to afford it or both?
Alice says
Has anyone here or know of anyone that has been accepted for a mortgage 3 years after discharge? I will be 3 years discharged on the 28th of November 23. I have 13 defaults with zero and settled dated 28th November 2020 (date of discharge)
I plan to apply for a mortgage around the 4th of December with Nationwide as apparently they accept mortgage applications 3 years after discharge. I am really worried it will be declined. Can anyone reassure me on this at all?
Much appreciated
Sara (Debt Camel) says
I haven’t heard that Nationwide is doing this.
How large is the deposit – what percentage?
I hope they accept your application – let us know!
Josh says
Hi.. thanks for this platform. I had ccj filed against me for unpaid debt. I decided to apply for bankruptcy few days after in 2021 because of that. I added the ccj, overdrafts from Santander and Barclays to the bankruptcy. I got discharged a year after with my credit file showing satisfied d bankruptcy and Santander but not Barclays, ccj and the company which I owed.
I requested for my statutory credit report from all experian, trans union and equifax. Surprisingly, the bankruptcy and the ccj are not showing on my credit report that I was sent by Experian but it appears to show 2 negatives on the website. Both statutory credit reports from equifax and transunion are showing Barclays overdraft and my creditors (ccj) s as defaults.
Another issue is, I also have a current account with TSB with no debt but was added to the bankruptcy . This was actually opened few months before the bankruptcy and I was hoping to use it for receiving my wages. I couldn’t access my wages in the first month as it had restrictions. I had to take a letter to the back to have access of my money. Since being discharged in 2021, I’ve given TSB a copy of the bankruptcy discharge form in order to remove the restriction. However, this has not been possible as the restriction only comes off for few seconds then it goes back on my account. I’ve been to the bank several times with same outcome. Is there a way I can rectify these issues please.
Thanks
Josh
Sara (Debt Camel) says
See https://debtcamel.co.uk/credit-file-after-bankruptcy/ for how the overdrafts should be update after your discharge and how to complain.
The CCJ will not be updated. It will drop off after 6 years, so just before you bankruptcy goes.
The TSB account – you aren’t using this any more, you just want to access the money in it?
Josh says
Thanks for the reply.
I wanted to start using the tsb account as it current account and I’m currently using basic hsbc account. I have only left a very small amount of money in the account just to keep it active
Sara (Debt Camel) says
It is very likely that TSB will not want to give you a full current account.
Colin says
Hi. I am struggling with debt and I started researching entering an IVA or bankruptcy. I have never missed a payment, but can’t seem to make any improvements. I also own a vehicle and some shares in a company(around 70% down at the moment). My question is, if I put the in my wifes name and transfer the shares to her, and become bankrupt or enter an IVA later will that be considered hiding assets? I never thought about bankrupty or IVA before, like i said i never missed a payment, just in the future if I cant keep up with them.
Thank you
Sara (Debt Camel) says
if I put the in my wifes name and transfer the shares to her, and become bankrupt or enter an IVA later will that be considered hiding assets?
yes.
How large are your debts? What sort are they – loans, cards, overdraft…
How much are the shares worth?
Are you buying or renting?
What is your credit rating like at the moment?