If you’re struggling with serious debt, bankruptcy can be a chance for you to make a financial fresh start, however it’s not a process to be taken lightly. That’s why it’s important you understand the implications before initiating bankruptcy proceedings.

In this guide, we’ll explore what bankruptcy is, who might be a good candidate, how you file for bankruptcy, and how – in the right circumstances – bankruptcy can help people turn their financial lives around.

What happens if I declare bankruptcy?

When you declare bankruptcy, you will turn over any valuable assets, and your creditors will be informed they can no longer pursue you for unpaid debts.

What is bankruptcy?

Bankruptcy is a legal process for people who owe money to creditors and have no means of paying it back. Bankruptcy allows you to forgo liability for your debts after a certain period of time. In exchange, you relinquish ownership of your money and assets.

Because the consequences of bankruptcy are severe, it’s generally seen as a financial last resort, but if you find yourself saddled with a level of debt that you simply can’t afford to repay, it might be the best way for you to start afresh.

Technically, bankruptcy is only available in England, Wales, and Northern Ireland. In Scotland they follow a similar process, but it’s legally known as sequestration.

How does bankruptcy work?

As soon as you declare bankruptcy, you’re officially agreeing to hand over your valuable assets, like your home, your car, expensive jewellery, and anything else of value. Once you do, these assets will be divided among the people you owe money to as part payment of your debts.

Depending on how much you earn, you may then be asked to make a regular payment towards your debts for a specific period of time. This is known as an Income Payments Agreement (IPA), and it applies to roughly 20% of bankruptcies.

Once you’re declared bankrupt, you will no longer have to deal with creditors anymore, lenders can’t threaten you with legal action, and you’ll eventually be ‘discharged’ from bankruptcy, leaving you debt free.

Am I suitable for bankruptcy?

Bankruptcy might be a suitable option for you if the following applies to your situation:

  • You are carrying significant debts (usually of £5,000 or more)
  • You have no reasonable way of repaying what you owe
  • You have few or no assets of value
  • You live in England, Wales, or Northern Ireland (In Scotland, you may be suitable for sequestration)

If the above applies to you, and you don’t think your financial situation is likely to approve in the near future, then it may be possible for you to initiate bankruptcy filings.

How do I initiate bankruptcy proceedings?

If you’re considering filing for personal bankruptcy, it’s important you first know what’s involved in the bankruptcy process.

Seek professional debt advice

Before taking any serious financial decision, you should always make sure you’ve taken debt advice. A professional debt adviser will be able to look at your situation and advise you on which debt solution would be best for you, whether that’s bankruptcy, an IVA, or another debt relief programme.

File for bankruptcy and pay the fee

Once you’ve taken debt advice and it’s decided that you’re a suitable candidate for bankruptcy, you then have to begin your application. You can file for bankruptcy online, via the UK Government website.

All you have to do is follow the steps, fill out the application with personal or financial information, and pay the fee. It’s a one-off payment of £680, which you won’t get back unless you cancel your application.

Wait for the adjudicator’s decision

Once you submit your bankruptcy application, an official adjudicator has 28 days to make a decision on whether to accept or reject your application.

They will be in touch if they feel they need more information on your case, after which they’ll be allowed an extra 14 days to make their decision. If they reject your proposal, you can appeal the decision.

If they accept your application, however, your legal status will change and the bankruptcy will be declared.

Cooperate with the official receiver

Within two weeks of being declared bankrupt, your property and assets will come under the control of the official receiver, the person who will act as your bankruptcy trustee – they play a role similar to an Insolvency Practitioner (IP) during an IVA.

Once your property is handed over to the official receiver, they will make arrangements to share it among your creditors and you will begin life under bankruptcy restrictions. You may be asked to open a basic bank account so that you can meet your financial obligations during your bankruptcy.

Get discharged from bankruptcy

So long as you cooperate with the official receiver and bankruptcy trustee, including making payments if you’re asked, then you will be discharged after a bankruptcy period of one year.

After your discharge, all of your debts will be cleared and you can begin the process of gradually rebuilding your financial profile.

Within two weeks of being declared bankrupt, your property and assets will come under the control of the official receiver

What types of debt can be included in a bankruptcy?

A bankruptcy will clear most types of unsecured debt, including:

  • Overdrafts.
  • Catalogs.
  • Benefit overpayments
  • Credit cards
  • Store cards
  • Unpaid utility bills

Debts secured against assets, like your home or car, will not be covered by bankruptcy, however, as you will be expected to relinquish control of your assets when you file for bankruptcy.


What happens to my unsecured debts once I'm discharged from bankruptcy?

Once you’ve been discharged from bankruptcy, which will usually be after 12 months, any outstanding debts that were included in the arrangement will be cleared.

Because bankruptcy doesn’t cover all debt types, you will be expected to continue making payments to secured debts like a mortgage or hire purchase agreement, as well as any debts accrued through fraudulent activity.

How we helped Paige

It was literally the best decision of my life, and it has actually changed my life, cheesy as that sounds, it has changed my life.

Paige , IVA Customer

Will I have to give up my assets if I file a bankruptcy petition?

If you file for bankruptcy, in most cases you will need to turn your assets over to the official receiver. That has implications for your home, car, and other assets you own.


If you rent your home, the chances are you won’t lose it during bankruptcy – the official receiver will make sure they leave you with enough money each month to pay your rent.

If you’re a homeowner, however, you may have to hand the keys to the receiver, who will sell the property in order to raise funds for creditors. Only exempt property, or property in which you hold little or no equity, will be excluded from the bankruptcy.


If your car is part of a hire purchase agreement, the official receiver may allow you to keep making payments towards it if they deem the vehicle essential to your ability to do your job. Otherwise, ownership will pass to the official receiver.

Similarly, if you own your vehicle outright and it’s decided you couldn’t do your work without it, you may be granted an exemption. In most cases where an individual owns their vehicle, however, it will be passed to the receiver and included in the bankruptcy.

How will bankruptcy affect my credit rating?

All bankruptcies are listed on the Individual Insolvency Register, a public record of all personal insolvencies in the UK. Credit reference agencies have access to this information, so details of your bankruptcy will be listed on your credit report.

This will temporarily lower your credit score, making it less likely that lenders like banks and mortgage brokers will be willing to let you access credit.

A bankruptcy will be removed from your credit report six years after your arrangement ends, leaving you free from debt and able to gradually build up your credit profile.

Where can I get more advice on bankruptcy and other debt solutions?

Because of the implications on things like your home, car, and your credit rating, bankruptcy should always be considered as a last resort. That said, if you’re struggling with serious debt you can’t repay, it might be a useful option for you.

At Your Debt Expert, we’ve helped thousands of people deal with their unsecured debt. We can offer you free advice and guidance based on your situation, and make sure you find the debt solution that’s best for you.

To discuss your options and get the support you need to deal with your debt today, contact us now on 0800 082 8086.

Advantages & Disadvantages


Eliminates unaffordable debts

Creditors accept less than they're owed

Protects you from legal action

Typically over with one year

Administrator takes care of the process


You will lose assets like home and car

Subject to creditor approval

Includes bankruptcy fee

You may be asked to make monthly payments

Will impact your credit

Where can I get more advice on Bankruptcy and other debt solutions?

To discuss your options and get the support you need to deal with your debt today, contact us now on 0800 082 8086 or click the button below to get started.