What bankruptcy actually is
Bankruptcy is a formal way of dealing with debts you cannot pay. When the bankruptcy order is made, control of your money and most of your assets passes to an official receiver (or a trustee), who deals with your creditors for you:
- Most of your unsecured debts are included — credit cards, loans, overdrafts, catalogues, most council tax arrears.
- Your creditors can’t take further action or chase you for those debts once the order is made.
- You’re usually discharged after 12 months, and the debts included are written off — even if they aren’t fully paid.
Why people choose it
Bankruptcy can wipe out debts you could never realistically clear and stop the constant pressure, giving you a clean start in about a year. For someone with little to lose and no way to pay, it can be the kindest option there is.
How you apply — online, for £680
In England and Wales you apply for your own bankruptcy online only, through the GOV.UK service. The fee is £680. You can start the application, save it and come back to it, and pay the fee in instalments — but you can’t submit it until the full £680 is paid.
- An adjudicator at the Insolvency Service checks your application — usually a decision within 28 days (longer if they need to ask you questions).
- If they accept it, they make a bankruptcy order and pass your case to an official receiver.
- You’ll be asked about your income, assets and debts, and must co-operate with the official receiver throughout.
Can’t afford the £680?
You can pay it in instalments before you submit, and some debt charities and local funds may be able to help. A free adviser can also check whether a
Debt Relief Order — which costs nothing — fits you instead. Never pay a private company a fee to “arrange” your bankruptcy: the official route is GOV.UK.
What happens to your home, assets and income
| What | What can happen |
|---|
| Your home | If you own it and there’s equity, it can be sold to release your share for creditors (there are protections and timescales). You must keep paying the mortgage — bankruptcy doesn’t stop repossession for secured debts. |
| Your things | Everyday household items and reasonable tools for your job are usually protected. Valuable items, savings and a car worth more than is reasonable can be taken. |
| Your income | If you have spare income, you may have to pay it for up to 3 years under an income payments agreement (IPA) — but only if you and the trustee agree you can afford it (or a court orders it). |
This is the big trade-off
Bankruptcy can cost you a home with equity, where a
Debt Relief Order or an
IVA might protect it. If you’re a homeowner, get advice
before you apply — it really matters which solution you choose.
Debts it does not clear — and the rules while bankrupt
Most unsecured debts are written off, but some are not included and you must keep paying them:
- Student loans, court fines, penalties for fraud, and child maintenance / child support.
- Debts secured on your home (your mortgage) and most debts run up by fraud.
While you’re bankrupt there are also restrictions:
- You must tell a lender you’re bankrupt if you want to borrow £500 or more.
- You can’t act as a company director, or form or manage a company, without the court’s permission.
- You can’t trade under a different business name without telling people you’re bankrupt.
- Bankruptcy is recorded on the public Individual Insolvency Register and stays on your credit file for 6 years.
Check the cheaper options first — a DRO can be free
Bankruptcy is not the only formal debt solution, and it’s often not the cheapest. Before you pay £680, it’s worth knowing:
| Option | Who it can suit |
|---|
| Debt Relief Order | Free. Debts under £50,000, assets under £2,000 (one vehicle up to £4,000 ignored), spare income £75/month or less. Often the better route if you have little to lose. |
| IVA | You can pay something each month and want to protect assets like a home. Run by a fee-charging insolvency practitioner over 5–6 years. |
| Breathing Space | You need 60 days’ legal protection — interest and action frozen — while you get advice and decide. |
| Debt management plan | You can clear the debts in a reasonable time with a single affordable payment and a bit of help. |
The honest answer to “which one?” always comes from free, impartial advice on your whole situation — not from a cold-caller who profits from signing you up.
Do this now
Before you apply or pay anything, make one free call — StepChange 0800 138 1111 or National Debtline 0808 808 4000 (or Citizens Advice). Ask them to compare bankruptcy, a Debt Relief Order and an IVA for your exact situation.
If creditors or bailiffs are piling on right now, you can press pause with Breathing Space and check your rights while you decide.
Scotland & Northern Ireland
This guide is for England & Wales. In Scotland bankruptcy is called sequestration, applied for through the Accountant in Bankruptcy (with a low-cost Minimal Asset Process route for people with little income or assets). Northern Ireland has its own process and fees. A free adviser or Citizens Advice can point you to the right one.