Bankruptcy Advice

Personal bankruptcy enables individuals in severe financial distress to clear debts and ultimately make a fresh start.  This is primarily achieved by selling assets, which may include your home if you have equity in it.

Declaring yourself bankrupt therefore has a significant impact on your life, so you shouldn’t enter into the process before obtaining expert UK bankruptcy advice. Fortunately, you can rely on Irwin Insolvency to provide the bankruptcy help you need.

As licensed insolvency practitioners, we’re qualified to manage personal bankruptcies and ideally placed to assess your financial position and explain what you stand to lose (or gain) with personal bankruptcy.

Another benefit of our bankruptcy advice is you’ll find out if an alternative to bankruptcy would be more suitable.

Simply call Irwin Insolvency today on 0800 254 5122 for your free, no-obligation initial consultation.

What is bankruptcy?

Personal bankruptcy is a UK legal process that ‘resets’ your financial affairs when you’re overburdened by unsecured debts.

Two major advantages of declaring bankruptcy are you receive legal protection from creditor action and aren’t expected to repay everything.

Funds to settle some debts come from the disposal of valuables and any surplus income. Remaining debts are cancelled when the process ends.

Personal bankruptcy can be a lifeline.

However, significant sacrifices are required. You give up non-essential assets, such as jewellery and electronics, and have very limited spending power.

That’s why you must only pursue bankruptcy in extreme circumstances – and why you stand to benefit from bankruptcy help in the form of bankruptcy advice from insolvency specialists.

It’s vital to check whether this process or a less gruelling alternative to bankruptcy is your best debt solution.

Key facts about bankruptcy

• You don’t go to court when declaring yourself bankrupt; instead, you apply online via gov.uk
• When applying, you need to pay a £130 adjudicator’s fee and £550 official receiver’s fee (£680 in total)
• No minimum amount of debt is required, and there’s no upper limit either
• Insolvency Service data for England and Wales shows people aged 35-54 are most likely to go bankrupt. Approximately two women and three men per 10,000 adults in this age group experienced bankruptcy in 2023
• Not everyone loses their home during personal bankruptcy, especially if they don’t have more than £1,000 equity in it
• Personal bankruptcy lasts 12 months

Who can apply for bankruptcy?

To apply for personal bankruptcy, you must:

• Be acting as an individual, not on behalf of a company
• Be insolvent (i.e. unable to repay debts on time and in full) and have explored or exhausted bankruptcy alternatives (Bankruptcy advice will help you to determine whether the process is your only viable option)
• Have unsecured debts that can legally be included in bankruptcy proceedings, such as credit card or store card debt, overdrafts, payday or personal loans, utility bills, rent arrears and catalogue debt
• Personal bankruptcy doesn’t cover secured or non-provable debts. Examples include mortgages, child maintenance, fines, personal injury damages, student loans and TV licence arrears.

What is the process of being made bankrupt?

1. You obtain UK bankruptcy advice to make sure personal bankruptcy is your best way forward
2. You seek a bankruptcy order from the Insolvency Service, which involves completing a bankruptcy application supported by details about your finances and paying the associated fee (Bankruptcy help prepares you for this step)
3. The adjudicator reviews your application and, if they’re satisfied that you’re insolvent, issues the bankruptcy order
4. The official receiver requests more details (about your valuables and expenditure, for example) and interviews you about what led to bankruptcy
5. The trustee (the official receiver or an insolvency practitioner) sells non-essential assets. They also ask you to make monthly repayments for up to three years if you can afford them. Funds are divided between creditors by the trustee.
6. After 12 months, you’re discharged from bankruptcy; outstanding debts are written off. You can request a Certificate of Discharge from the IS.

Bankruptcy advantages

• Personal bankruptcies get people’s finances back on track
• You can enter the process voluntarily
• Bankruptcy help and bankruptcy advice are readily available – you’re not alone
• Personal bankruptcy covers a wide range of debts
• Creditors can’t contact you or continue or launch legal action
• You keep essential assets
• You become debt-free in 12 months

Bankruptcy disadvantages

• Personal bankruptcies are public knowledge, as they’re recorded in The Gazette and Individual Insolvency Register
• Declaring yourself bankrupt isn’t free
• The process doesn’t cover every type of debt or immediately wipe the slate clean
• Going bankrupt damages your credit score and appears on credit reports for six years
• You may only be able to use a no-frills bank account and will struggle to borrow money
• Your home, vehicle and business may be sold
• Personal bankruptcy may impair your ability to work, especially if you handle money

How will bankruptcy affect you?

During personal bankruptcy proceedings, you’ll be subject to certain restrictions that will have a considerable effect on your life.

Assets

You won’t get to choose what happens to significant assets or manage the selling process.

Financial affairs

You’ll only be able to spend money on essentials such as groceries.

You may not be entitled to continue using your existing bank account and have to open a basic alternative with no overdraft instead.

You won’t be able to borrow over £500 without telling lenders you’re bankrupt, which may put them off or lead to stricter terms.

Work

You won’t be able to act as a company director or create, manage or promote a limited company without permission from the court.

If self-employed, you’re unlikely to be allowed to keep your existing business going. It will almost certainly be closed and its assets sold.

You may be prevented from working in financially sensitive fields (such as accountancy) or holding public office.

Thankfully, obtaining bankruptcy help from our insolvency practitioners means you can prepare effectively for the proceedings and will have a clear idea of what to expect.

How to know if bankruptcy is right for you?

Personal bankruptcy could be appropriate if you have unmanageable debts, they exceed the value of your assets, and you’re prepared to endure hardship to reach a more financially stable position.

But the only way to be certain about whether bankruptcy or an alternative to bankruptcy is right for you is to obtain UK bankruptcy help from a trusted source.

Our insolvency practitioners’ insights will bring clarity to your circumstances.

Alternatives to bankruptcy

When providing bankruptcy advice, we’ll help you to find an alternative to bankruptcy if at all possible.

Major bankruptcy alternatives include:

• Individual voluntary arrangement – a legally-binding, five-year repayment plan managed by insolvency practitioners. IVAs are a popular alternative to bankruptcy, as you retain control of assets, and may be suitable if you owe more than £10,000
• Debt management plan – a non-legally-binding repayment plan overseen by a licensed debt management company that divides funds between creditors
• Debt consolidation loan – this streamlines your finances by clearing multiple debts and leaving you with just one creditor (i.e. the lender)
• Debt relief order – stops repayments and cancels debts in 12 months if you owe less than £50,000, aren’t a homeowner and have almost no assets or surplus income
• Administration order – if you have a county or high court judgement and owe less than £5,000, this lets you make repayments directly to the court

Personal Bankruptcy FAQs

Can I declare myself bankrupt?

Yes – although creditors instigate some personal bankruptcies, you can declare yourself bankrupt instead if overburdened with debt. But please note you won’t be officially bankrupt until the Insolvency Service issues a bankruptcy order.

What does declaring bankruptcy do?

Declaring bankruptcy relieves creditor pressure and sets you on the road to a debt-free future. Some debts are repaid using assets and any surplus income and the rest wiped out, so you can start afresh.

How to declare myself bankrupt – what should I do?

First, obtain sound bankruptcy advice (from a UK insolvency practitioner, for example). When you’re certain personal bankruptcy rather than an alternative to bankruptcy is your best option, gather together financial documents (bank statements, wage slips, bills, etc.). Then visit the government’s website to apply for bankruptcy.

How to apply for bankruptcy – what’s involved?

Applying for personal bankruptcy involves sharing accurate, detailed financial information with the Insolvency Service. The adjudicator will accept/reject your application within 28 days.

Where can I get help with bankruptcy fees?

The charity Turn2us offers financial help for some personal bankruptcies. Alternatively, someone you trust might agree to pay. Or you can pay in instalments.

What items are classed as essential assets?

Items required for day-to-day domestic life, such as basic clothing, bedding and furniture, are classed as essential assets. As such, they aren’t sold during personal bankruptcy proceedings.

If you can’t do your job without certain items (tools, say), they’re essential assets. Your vehicle may also be deemed essential if you need it to work or care for a dependent.

Can you go bankrupt more than once?

Yes, you can – but bear in mind the process is always a last resort. If you’ve found yourself struggling financially again, it’s crucial to seek bankruptcy help from an insolvency expert in case a less drastic alternative to bankruptcy would be suitable this time.

UK bankruptcy advice from insolvency experts

Declaring yourself bankrupt is a life-changing step and may not be your only option. That’s why bankruptcy help from our experienced, sympathetic insolvency practitioners can be an invaluable investment.

Contact Irwin Insolvency today for expert bankruptcy advice and make the right decision about your financial future.