Bankruptcy and your options

Bankruptcy can be seen as a last resort and for many people it is, but looking at bankruptcy in detail could help you to see that it is a viable option for you. You can initiate bankruptcy yourself or if your debt to one creditor is more than £5,000, they can start the process themselves. The final reason you can be made bankrupt is due to breaking the terms of a Individual Voluntary Arrangement, known as an IVA, and this would be initiated by an insolvency practitioner.

Protection From Creditors

The court will issue a bankruptcy order if you can show that you are technically insolvent. Once this is completed you won’t have to deal with your debts yourself nor anyone you owe money to. Some items you own may be sold to pay your debts and this could include your house and your car.

Some debts can be written off but some others cannot be. Some of the debts that cannot be written off are:

  • Child support
  • Court fines
  • Confiscation orders from a court
  • Student loans
  • Secured loans
  • Benefits or tax credit payments

Bankruptcy vs Insolvency

It is also important to remember that you can only declare bankruptcy as an individual – a limited company that cannot pay its debts will have to declare insolvency.

An official receiver will write to you to arrange a meeting after you have been granted a bankruptcy order and at this meeting you will need to provide details about the money you owe and to whom and outline all of your assets and your income, including any pensions or savings.

During a period of twelve months after being declared bankrupt, there are a number of restrictions placed upon you. If you break any of these restrictions, you could be prosecuted as it is against the law. These restrictions are:

  • Acting as a company director
  • Borrowing money without telling the lender you are bankrupt (any amount over £500)
  • Manage a company without seeking agreement from the court
  • Run a business without telling anyone you trade with that you are bankrupt
  • Work as an insolvency practitioner

In addition to these restrictions you will have to make payments from your spare income each month, providing you can afford it. This can continue for three years and is called an Income Payments Agreement or IPA.A bankruptcy record will be kept on your file for six years afterwards and you may need to send the credit reference agencies details of your discharge so they update your file. Before deciding to apply for bankruptcy, you should look at all your options first and discuss them with a specialist insolvency professional first.


If you would like more information about bankruptcy and what it means for you, please call us on 020 7490 5861 or email us on and we’ll be happy to help.