Under UK bankruptcy law, creditors write off your unsecured debts, allowing you to make a fresh start. But during the 12 month term you will be subject to certain restrictions.

If the court approves your bankruptcy, creditors are legally bound to stop charging interest and they will be prohibited from contacting you or taking legal action to recover the debt.

In certain cases, monthly payments are paid towards your debts from your available income for up to three years. This is known as an income payment agreement.

The official receiver will investigate your situation and payments over the last 5 years. They can go further back than this if they wish.

Bankruptcy restrictions

When you are made bankrupt, there are restrictions on obtaining credit of more than £500 without disclosing your status to the lender, trading in a name other than the one in which the bankruptcy order was made and acting as a director during the bankruptcy period. You are also prevented from becoming a school governor.

Bankruptcy laws also mean your assets could be sold to pay creditors, so it is not something that should be entered into lightly.

Your credit file will also be severely affected and you will not be able to obtain credit for several years.

Free bankruptcy advice

Always get expert advice before entering into the legal process of bankruptcy.

Use CCCS Debt Remedy, our online counselling service, for help and advice concerning your debt problems.