People often ask if they should tell their creditors that they are going to go bankrupt.
It is normally a good idea to tell your creditors if you are in financial difficulties, not ignore them. But in this situation it won’t help you much and, if you own a house, it could be dangerous.
You won’t gain from telling your creditors
Few creditors will feel sorry for you and stop pestering you if you tell them you are going bankrupt. So you aren’t likely to gain anything.
Most will ignore it. They have heard lots of people say they are going bankrupt and some of them don’t intend to do it, they are just hoping a creditor will write off a debt.
A few debt collectors, especially bailiffs, may even decide to hassle you more as this is their last chance of getting any money from you :(
Almost all debts are wiped out when you bankrupt. But if you have already let a bailiff into your house and he has a list of things he will take if you don’t make agreed payments (called a controlled goods agreement), this isn’t wiped out. So before you go bankrupt you need to keep a bailiff out of your house if possible, see Bailiffs – do you have to let them in?
Be very careful if you have a house
And if you have a house then you need to be more careful.
If you want to stay in your house after bankruptcy
Bankruptcy doesn’t always mean losing your house if it is in negative equity or there is someone who could “buy” your equity from the Official Receiver, see the information on bankruptcy for more details.
If you tell an unsecured creditor that you intend to go bankrupt, there is a risk that they may rush to try to get a charge over your house. If they can do this, then their debt will not be wiped out by your bankruptcy.
This isn’t usually a very large risk as it will take some time for the creditor to first get a CCJ and then apply for a charge – most creditors simply won’t bother unless they already have a CCJ. But court cases are a hassle that you just don’t need at all, so avoid this by not mentioning bankruptcy.
If you are going to leave the house and rent
The problem of unsecured creditors going for CCJs and then charges won’t matter if you are going to hand back the keys and have the house repossessed. But in this situation, if you have stopped paying the mortgage or any secured loan in order to save up a deposit to rent then it is essential that you don’t tell the mortgage lender that you intend to go bankrupt.
You want to be able to stay in control, so that you leave the house when you want – when you have found somewhere to rent -rather than be evicted.
If you tell the lender that you are going bankrupt, then they may try to get a possession order immediately if you have arrears. Even if you expect to be renting in a few weeks from now it is still better to say nothing – something may go wrong with your plans. The page about the process of going bankrupt talks about the “race” for you to find somewhere to rent before you are evicted – make sure you have a head start in this race by not telling your mortgage lender that you are going to go bankrupt.
So what should you say?
Anything really, just don’t mention the B word. Offer them a token payment of £1 a month, tell them you expect to be able to pay more in a few months time or simply say you are going to be taking debt advice and leave it at that.
Of course if you have the bankruptcy fees ready, then it doesn’t really matter who you tell. The process of applying to become bankrupt and having your bankruptcy approved can be very quick. But if it is going to take quite a few months to save up the bankruptcy fees then your life is going to be easier if you don’t tell your creditors.
What about after bankruptcy?
After bankruptcy the Official Receiver will contact your creditors and tell them – you don’t have to. But there are a few situation in which you may want to, see Who should you tell when you have gone bankrupt? for details.
How to get the money for bankruptcy fees
A checklist for going bankrupt
How & why to reply to a Letter Before Claim
dee4378 says
Just a quick question I’ve filled out the bankruptcy application and I’m now trying to get the funds together to submit it (probably going to take a month or so more), there are a number of creditors who are constantly chasing and I cant afford to pay them anything, should I inform them about the bankruptcy and give them the reference number?
Thanks
Sara (Debt Camel) says
No! they may just chase you harder as this is their last chance – also they may not believe you or may think it will be ages before you go bankrupt. As the article above says, you could tell them you are taking debt advice as you don’t know how much should be paid to which debt. (Incidentally I hope you have taken some debt advice? Even if you are sure bankruptcy is the best option for you, it’s worth half an hour of your time to talk to an expert – call National Debtline on 0808 808 4000.)
Rob says
Hi Sara went bankrupt 3 years a go and out of the blue a creditor is asking me to pay of a debt they where included in my bankruptcy so last week sent them the bankruptcy order From 2016 they are now asking me to get in touch with official receiver so to send them documentation confused as I have already sent them the letter that the official receiver sent me any advice would be grateful
Sara (Debt Camel) says
I suggest you say they should ask your Official Receiver for any further information.
Bial says
Hi, this website says that from the date you pay and send your bankruptcy application until you are made bankrupt it takes usually 2 days. On the gov.uk it says 28 days. How long should I expect to wait at the moment? Also if I don’t tell my creditors anything at all and just go bankrupt (I haven’t missed payments) is that wrong or could it cause me problems? (I’ve seen your article you advise to tell them something but not mention bk) but what if I just don’t tell them anything as they might get suspicious and block my account ? Will the creditors find out anyways because if I pay with one of their debit cards they could see ‘bankruptcy fee’ and then either try to block the payment and try to take all the money or freeze the account immediately after the bankruptcy fee has been paid?
Sara (Debt Camel) says
2 days is the norm. the most common reason for an application to take longer is the insolvency Service needs to look into some jurisdictional issues – if you have lived in Britain for many years this is unlikely to apply to you.
“if I don’t tell my creditors anything at all and just go bankrupt (I haven’t missed payments) is that wrong or could it cause me problems? ” no – what causes problems is if you treat your creditors differently, but paying them all is fine.
“Will the creditors find out anyways because if I pay with one of their debit cards they could see ‘bankruptcy fee’ and then either try to block the payment and try to take all the money or freeze the account immediately after the bankruptcy fee has been paid?” there are 8 million people with problem debt in Britain. Banks don’t waste money employing people and engineering systems to try to work out which are likely to go bankrupt.
BUT have you taken advice on bankruptcy? It is always worth doing this – especially if you haven’t missed any payments yet to your debts! It may be your best options but this is not a decision you want to get wrong.
Bial says
Thanks yes I have taken advice. Looks like the best option. Two more questions I would like to ask…When submitting the application for bankruptcy do I have to include all the bank accounts even the new basic one I just opened with no money or debts if so will it get frozen aswell? Lasty do the bank accounts freeze from the day I send my application or when the bankruptcy is approved? Thanks a lot
Bial says
Sorry forgot to ask something very important aswell. Last year I used some bank balance transfers with credit cards to keep my interest 0% on other credit cards, this was almost a year ago. Does that count as giving creditors preference? In ally credit cards I’ve always paid minimum amount monthly. Also if I have around £1000 in my bank can I still go bankrupt or will the judge say “You have money you can’t go bankrupt!!”? thanks In advance
Sara (Debt Camel) says
Preference is paying some creditors and not others. Not refinancing credit to get lower interest rates, nothing wrong with that.
Your bankruptcy can’t be refused because you have some money providing you are insolvent – if you have had good advice (who was it from?) this shouldn’t be a problem.
Bial says
So sorry something I forgot again. Should I get bank statements before filing as I imagine once bankrupt and bank accounts are frozen they won’t be able to send me statements if I need them for the Or?
Sara (Debt Camel) says
It’s not a bad idea to get them organised before applying for bankruptcy but I have never heard of anyone having difficulty getting statements afterwards.
Bial says
Ok Thank you for your help I used stepchange for advice.
Sara (Debt Camel) says
If they said bankruptcy was an appropriate option for you you should not have a problem with the OR saying you are not insolvent.
Paul says
Ime in the prosess of going bankrupt, one once I’ve paid my fee do I cancel my direct debits to the loan company’s or do I carry on paying my loans till my bankruptcy has gone through
paul says
I am in the process of going bankrupt but am trying to save for the fees. I obviously don’t want it to drag out but it will take time as i don’t much surplus at all. I know it says in the above article that i Can i offer the creditors £1, would you think this is an OK thing to do in the interim period of a few months?
Sara (Debt Camel) says
Yes you can – this is a very sensible thing to do or you could simply stop paying. Offering £1 a month to non priority debts will reduce your hassle over a period of 6-12 months, but it generates quite a lot of hassle at the start. So you could just stop paying and reply to any phone cals or emails saying you are going to take debt advice about your situation.
Links you may find useful:
– what are priority debts? https://debtcamel.co.uk/start/priority-debts/
– how to get the money for bankruptcy fees https://debtcamel.co.uk/help-with-bankruptcy-fees/
And if you haven’t yet had any debt advice, talk to National Debtline on 0808 808 4000. you may be convinced bankruptcy is your best option but it is ALWAYS worth the time to talk this through with a good debt adviser.
Daniel says
Hi, I am just starting out on applying for bankruptcy, I have all the info from StepChange, I have included all my debts and have come to terms with losing my property, I only own 50% in a shared ownership with a housing association, I am able to live with my partner, my question is should I just stop paying the mortgage and other bills that go with running a property alongside stopping paying my loans, credit cards etc. Do I have to tell my mortgage provider or will I just default and the property will get repossessed as I don’t want to keep paying money into something I am willing to lose for a fresh start.
Sara (Debt Camel) says
In general it’s best for you to move out now and tell the HA and mortgage lender they can have the property back and tell the utility companies.
StepChange can talk through the details if you are unsure about what to do or in what order.
In particular I hope you have talked through the option of selling the property first with StepChange. Bankruptcy now and letting the house be repossessed may be a better option but it’s good to look at the alternatives.
John says
Hello. I wondered if you can tell me how Statutory Maternity Pay is viewed in bankruptcy. Is it seen as an income as it changes dramatically in the year. Is it a benefit or income? Are they likely to put make you pay from your first 6 weeks when it is higher and then when it gets lower or stops you stop? Many thanks.
Sara (Debt Camel) says
So far as I know it is treated as your wife’s income. If you are concerned about paying an IPA and/or the timing of going bankrupt you need to talk to a debt adviser in detail. I suggest you phone National Debtline.
Liane says
Hi, I’m just in the process of applying for bankruptcy (will be a while before I can submit the application as I don’t have the funds to pay for it yet) – Do I open a basic bank account now or wait until I submit my application – and can I ask my existing bank if they will switch me to a basic account or should I go to a new bank. I have a loan and credit card with my current bank too so they will no doubt work out why I’m asking.
Sara (Debt Camel) says
I would wait until your application has been submitted.
Have you taken advice about bankruptcy? It is always worth doing this, even if you think you have no alternative – phone National Debtline on 0808 808 4000.
Are you making payments to the loan and credit card? And other debts?
Liane says
I’m not currently making payments as took a 3 month COVID payment break, but they’re due to start again soon. I’ve written to my creditors today informing them I’m seeking help. I’ve been online with stepchange
Sara (Debt Camel) says
OK not paying anything to non priority debts is the best way to try to save up the bankruptcy fees as fast as possible. See https://debtcamel.co.uk/too-broke-to-go-bankrupt/ for other ideas.
If you have just used StepChange’s online tool and it suggested bankruptcy, I still think you should talk to a debt adviaser. StepChange or National Debtline, up to you. The online tools can only go so far, talking to a debt adviser will help.