Bankruptcy

You can request a bankruptcy order yourself, or one of your creditors can do it. The court is then responsible for making you officially bankrupt. The control of your assets is passed on to a trustee, who recovers as much money as possible, within certain guidelines, to pay your creditors.

People with a large debt who can’t resolve it in other ways.

You can normally write off most of your debts and when the bankruptcy is over (normally in one year), you can make a fresh start.

• Creditors can no longer pursue you for payment after declaring bankruptcy
• Your assets are distributed fairly between your creditors
• You can start again, as early as one year from being declared bankrupt
• You can keep certain things, like household items and a reasonable amount of money to live on

There are many disadvantages to declaring bankruptcy. Here are the main ones:

• your home and some possessions (such as your car) may have to be sold
• your credit rating will be adversely affected for many years
• your bankruptcy will not be kept private
• you will be prevented from acting in certain professional capacities, including as a company director, chartered accountant, lawyer, Justice of the Peace and Member of Parliament
• there is a stigma attached to bankruptcy

You need to apply for bankruptcy at your local County Court or, if you live in London, the High Court. It will cost £310. If your bankruptcy is approved, your bank account will be frozen and your assets will be put under the control of someone called an Official Receiver.

To find out more about bankruptcy, please refer to:

• Citizens Advice Bureau’s website
• Insolvency Service website