Bankruptcy in the UK

What is bankruptcy in the UK?

Bankruptcy in the UK is a legal status that usually lasts for a year and can be a way of clearing debts you can't pay. When you're bankrupt, your non-essential assets and excess income are used to pay off your creditors At the end of the bankruptcy period, most debts are cancelled.

How do you become bankrupt in the UK?

A court can declare you bankrupt in the UK by issuing a 'bankruptcy order' after it's been presented with a 'bankruptcy petition'.

Filing your own bankruptcy petition in the UK.

The deposits for presenting bankruptcy and winding up petitions have increased with effect from 6 April 2008. Details in the following publications are affected: 

The new deposits are: 

Deposit Type	Old fee	New fee
Debtor’s bankruptcy petition deposit	£335	£345
Creditor’s bankruptcy petition deposit	£400	£415
Winding up petition deposit	£670	£690

Once bankruptcy proceedings have started, you must co-operate fully even if it's a creditor's petition and you dispute their claim. If possible you should try to reach a settlement before the petition's due to be heard - doing it later can be difficult and expensive.

Alternatives to bankruptcy in the UK

Bankruptcy is a serious matter - you'll have to give up possessions of value and the interest in your home. However, you don't have to become bankrupt just because you're in debt. You can try to make arrangements with your creditors instead - including:

• Informal Agreements - you write to your creditors and try to agree a repayment timetable 
• IVA – (Individual Voluntary Arrangements) - an insolvency practitioner helps you negotiate repayment terms
• Administration Orders - a county court orders you to make payments to the court, which the court then distributes amongst your creditors

Please note that bankruptcy petitions are usually presented in the High Court in London or at a county court near where you live or trade.

Who deals with your bankruptcy in the UK?

An Official Receiver is appointed to protect your assets. They act as trustee of your bankruptcy affairs if you have no assets. If you do have assets, an Insolvency Practitioner will be appointed to act as trustee and sell your assets to pay your creditors.

How bankruptcy in the UK affect your assets

Once you're bankrupt, the Official Receiver, or appointed trustee, can sell your assets to pay your creditors. However, certain goods aren't treated as assets for this purpose, for example:

• equipment you need for your work (eg, tools or vehicles)
• household items needed by you and your family (eg, clothing, bedding and furniture)

Earnings

The Official Receiver can look at your income (taking into account expenses such as your mortgage, rent and household bills) and decide if payments should be made to your creditors.

You may be asked to sign an 'income payments agreement' to pay fixed monthly instalments from your income for three years.

If you don't pay (or if you don't sign the agreement voluntarily), the Official Receiver can apply for an income payments order from the court to order you to pay - running for at least three years from the date of the order.

If your circumstances change, you'll need to tell the Official Receiver, so they can review these arrangements.

Ongoing commitments

You'll still have to meet ongoing commitments such as rent or debts incurred after you become bankrupt in the UK.

Your obligations when you're bankrupt I the UK.

• give the Official Receiver details of your finances, assets and creditors
• look after your assets and hand them over to the Official Receiver with the relevant paperwork, such as bank statements and insurance policies
• tell your trustee (either the Official Receiver or insolvency practitioner) about any new assets or income during your bankruptcy
• stop using credit cards and bank or building society accounts
• not obtain credit over £500 without telling the creditor that you're bankrupt
• not make payments direct to your creditors (there are exceptions to this, such as mortgage arrears and outstanding child support payments)
• You may also have to go to court and explain why you're in debt.

How long does bankruptcy I in the UK last?

Bankruptcy normally lasts for one year. After this time, you'll be 'discharged' from your bankruptcy regardless of how much you still owe.

Your discharge could happen earlier if you co-operate fully with the Official Receiver. However, in a small number of cases and if you've behaved irresponsibly (eg, not cooperating), bankruptcy can last for much more than one year.

If you would like any further information and advice about bankruptcy in the UK and the possible alternatives to going bankrupt, please contact Money Advice Direct bankruptcy team on 0800 074 6918. The service can advise on all aspects of bankruptcy law including the Disadvantages of Bankruptcy, How to File for Bankruptcy, How to Avoid Bankruptcy and the Effects of Bankruptcy.

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What is bankruptcy? | Bankruptcy explained | The bankruptcy process | The effects of bankruptcy | The disadvantages of bankruptcy | How do I petition for my own bankruptcy? | What happens after bankruptcy? | What are the alternatives to bankruptcy?| Can my bankruptcy be reversed? | Can my bankruptcy be cancelled? | New legislation - the Enterprise Act 2002? | Frequently asked questions | Bankruptcy additional facts | UK Personal Bankuptcy | Bankruptcy Records | Bankruptcy Advice | What happens when you visit the Official Receiver's Office? | What happens to my home in bankruptcy? | What happens to my pension in bankruptcy? | When will my bankruptcy end? | How am I made Bankrupt? | Where is the Bankruptcy Order made? | Who will deal with my bankruptcy? | Who do I need to tell if I go bankrupt? | What are your duties as a bankrupt? | What effect will Bankruptcy have on your credit rating? | Payment to your creditors in Bankruptcy | What happens to your assets in bankruptcy? | What is a bankruptcy restriction notice? | What is a form J restriction? | What happens in bankruptcy if I rent my house? | What happens to your life assurance policy in bankruptcy? | What happens to your business in bankruptcy? | What happens to your wages in bankruptcy? | What are bankruptcy restrictions orders and undertaking? | Debts you have incurred after you have been made Bankrupt | What are the advantages of going Bankrupt? | What are the disadvantages of going Bankrupt? | What are the implications of  Bankruptcy? | Jersey - a guide to Bankruptcy Law | Bankruptcy Law | Student Loans and Bankruptcy | Bankruptcy Forms | Avoid Bankruptcy | Business Bankruptcy | Accountant in Bankruptcy | Bankruptcy Lawyers | Bankruptcy Search | Bankruptcy in the UK | Declaring Bankruptcy | Filing for Bankruptcy | How to go Bankrupt | Insolvency Practitioners | Voluntary Bankruptcy | How do I avoid Bankruptcy? | Consequences of Bankruptcy | Borrowing after Bankruptcy | Bankruptcy and Student Loans | Annulling the Bankruptcy | Bankruptcy - The Court | Bankruptcy Bank Accounts | Debt Resolution Forum | Mortgage after Bankruptcy | Personal Bankuptcy | Bankruptcy Mispellings