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Becoming Bankrupt

Bankruptcy is a court order that you can apply for if you are in serious debt. Once you have been declared bankrupt, you will no longer have to deal with the people you owe money to (your creditors). 

The Official Receiver will take control of your money and property, and they will deal with your creditors.

Filing for bankruptcy might not be your only option and it might not be the best one for you. If you are faced with bankruptcy, you'll need expert advice, simply complete our no obligation enquiry form.

Bankruptcy no longer carries the stigma it once did, nevertheless it is a serious course of action and you need to look at all options before you take this route. 

Under the new Enterprise Act introduced in April 2004, a bankrupt person may be discharged within 12 months.

Advantages of bankruptcy
  • You are relieved of the stress and pressure of dealing with your creditors.
  • You will be able keep certain things such as household goods and a reasonable amount to live on.
  • When the bankruptcy order ends, you can make a fresh start. In many cases, this is after twelve months.
  • Creditors will cease court action to get their money back.
  • The money you owe is usually written off.
Disadvantages of bankruptcy
  • It will cost you money to go bankrupt.
  • Whilst you are bankrupt, you won't be able to apply for any form of credit such as a mortgage or loan.
  • You risk losing your home if you are a homeowner.
  • You may have to sell some possessions, possibly your car and luxury items you own.
  • Some professions don't let people who have been made bankrupt carry on working.
  • If you own a business, it is likely that the Official Receiver will shut down your business, dismiss your employees and sell off any assets.
  • A list of people declared bankrupt is published on the internet and your details could be published in your local newspaper.
  • Even when you are discharged as a bankrupt, there are some debts such as court fines and student loans that will never be written off.

How is a bankruptcy order is made?

If after consideration bankruptcy is the best option, you will need to apply to court. The court will decide either to decline your application, or to grant a bankruptcy order.  Once the bankruptcy order is made, all your bank and building society accounts will be frozen and your money will come under the control of the Official Receiver.  

The Official Receiver will arrange an interview with you and following the interview they will contact the individuals and companies you owe money to inform them about the bankruptcy. Your assets will be sold to raise funds in order topay off some or all of your debts.  The costs of the bankruptcy will be paid first. These are fees that the Official Receiver charges for dealing with your case.