Bankruptcy in England and Wales

What is bankruptcy?

Bankruptcy is one way of dealing with debts you cant pay. This is a formal process administered by the Adjudicator or Court and based on three main principles:

• Your property and assets are shared out fairly among you creditors
• Your financial and business affairs will be dealt with by a specially appointed professional
• You are freed from the majority of debts after 1 year

Advantages of bankruptcy

• You can make a fresh start after one year.
• Moneys owed to banks, financial firms, private and government companies, private individuals, central and local Government Authorities, income tax debts, welfare benefits over-payments and many more are written off after 1 year. Exceptions explained here.
• You dont have to deal with your creditors any more. An official called the Official Receiver deals with your creditors.
• Creditors cannot take further debt recovery action unless the debts are secured on your home or other property.
• You may be able to avoid having to sell your home if your partner, relative or a friend can buy your share of its value after any debts secured on it have been paid.

Disadvantages of bankruptcy

• Your assets are included in the bankruptcy estate and may be sold, this may include your home and vehicle.
• Whilst bankrupt you cannot obtain credit over £500 without disclosing your bankruptcy to the prospective creditor.
• Your credit score will be affected and will continue to be affected for five years after you have received discharge from the bankruptcy.
• If you have surplus income and you can afford to make some payments into the bankruptcy then you may be forced to make such payments to the Official Receiver or your Trustee in Bankruptcy for up to three years.
• Your bankruptcy details will be held on the Individual Insolvency Register, published in the London Gazette and may be published in your local newspaper.
• Certain professions will not allow you to continue practicing as a member of their profession (for example chartered accountants, lawyers, financial advisers, bank managers, police officers and members of the armed forces).

During the bankruptcy you cannot:

• act as a limited company director;
• take any part in the promotion, formation, or management of a limited company;
• act as a Justice of the Peace, school governor or insolvency practitioner;
• be a member of the Local Authority;
• trade in any business under any other name than that used at the time of the bankruptcy order.

A bankrupt may be subject to a Bankruptcy Restriction Order (BRO) for between 2-15 years if they are found to be culpable, reckless or dishonest with their financial and business affairs. Also there are some powers for the official receiver and the trustee in bankruptcy to take criminal action against bankrupts – for example if they have committed fraud.

How we can help you  Bankruptcy Assistance Service

Further information about bankruptcy – Bankruptcy Questions and Answers

Before applying for bankruptcy – Debt Solutions

Independent information about bankruptcy – the Insolvency Service booklet Guide to bankruptcy

Technical information about bankruptcy – the Insolvency Service Technical Manual

How much we charge for our services  Our Fees