The Consumer Credit Counselling Service

Bankruptcy Advice

What is Bankruptcy?

• Bankruptcy is a way of becoming free of debts that you might never be able to repay.

How does Bankruptcy work?

• You will have to make a petition to your local County Court or the High Court in London.
• In the petition you have to detail your income, outgoings, debts and assets. Your petition must be completely truthful and accurate.
• Your petition will be examined and the court will decide whether to make a Bankruptcy Order.
• You will be interviewed by the Official Receiver. The Official Receiver is a civil servant who will deal with the creditors and decide what to do with assets such as vehicles and property.
• In Bankruptcy your assets are usually sold. Your creditors are then paid with the proceeds of the sale. If the creditors are not paid in full then any shortfall is written off.
• You will be subject to certain restrictions during and after the Bankruptcy proceedings.

How much does Bankruptcy cost?

• Bankruptcy costs £495. This includes:
• The court fee of £150.
• The Official Receiver’s fee of £345.
• This fee is payable when you take your petition to the court.
• Remember that Bankruptcies are dealt with on an individual basis. A couple could not present a joint Bankruptcy petition. Each individual would have to make their own petition and pay the full fee.

How will I afford the Bankruptcy fees?

• In some circumstances the court fee of £150 can be waived. If you receive income-based benefits such as Income Support then the court fee should be waived. The fee can also be waived in cases of hardship. You can apply for exemption using form EX160A.
• Many utility companies offer trust funds to those experiencing financial hardship. You should contact your gas, electric and water suppliers and ask if they run such a scheme.
• It may be necessary for you to save money in order to pay for your Bankruptcy. Saving can be difficult and may take time but remember that Bankruptcy will allow you to become debt free more quickly than if you continued trying to repay your creditors.

How do I make myself Bankrupt?

• A petition must be made.
• You can obtain the relevant court forms from your local County Court. You will need to ask for form 6.27 (Debtor’s Petition) and form 6.28 (Statement of Affairs). These forms are also available online from the HM Court Service website.
• You can also fill in the forms online via the Insolvency Service website.
• Before presenting your petition to the court you will be required to swear an oath. This has to be done in the presence of a court official, solicitor or a Commissioner for Oaths.
• Not all County Courts deal with Bankruptcy proceedings. You can check with your local County Court or visit the HM Court Service website.
• You will need to pay the relevant fees and then the Bankruptcy proceedings will begin.

Will I have to go to court?

• Yes. You will have to present your petition in person at the court.
• The court will sometimes hear your petition immediately but they might need to arrange a hearing at a later date.

Can my creditors make me Bankrupt?

• Yes. If you owe a creditor over £750 then they can petition for your Bankruptcy.
• Before making you Bankrupt a creditor would have to issue you with a Statutory Demand.
• Making you Bankrupt is likely to cost a creditor around £1500.
• The courts would have to approve the petition just as they would if you petitioned for your own Bankruptcy.

Will I still have to pay my creditors after I’m Bankrupt?

• The Official Receiver will assess your incomings and outgoings and decide if you have to pay any money into the Bankruptcy fund.
• You may be asked to pay a regular amount for a maximum of three years.
• This is known as an Income Payment Agreement (IPA)/Income Payment Order (IPO).
• If your circumstances change during this period then the Official Receiver could review your IPA/IPO.
• If you lost your job the Official Receiver might reduce your payments and if you received a pay rise might ask you to contribute more.

How long does Bankruptcy last?

• Bankruptcy usually lasts for twelve months.
• During the first twelve months of Bankruptcy, you will be an 'un-discharged Bankrupt'.
• Whilst you are an 'un-discharged Bankrupt' you will be subject to certain restrictions.
• As long as you comply with the restrictions then after twelve months you will be discharged from Bankruptcy.
• You can sometimes be discharged before twelve months as long as the Official Receiver has finished looking into your financial affairs.
• An IPA/IPO can last for up to three years. If you have made such an agreement with the Official Receiver then these payments will continue even after discharge.
• The Bankruptcy will be recorded on your credit file for six years from the day on which the court made the Bankruptcy Order.

Are any debts excluded from Bankruptcy?

• Student loans are excluded from Bankruptcy. You will still be required to repay the loan and the arrangement will not in any way be affected by the Bankruptcy.
• Benefit overpayments can sometimes be recovered even after Bankruptcy.
• Court fines are excluded from Bankruptcy. You will be expected to pay the fine and adhere to payment arrangements made previously.
• Child Support payments and other family maintenance debts are not included in Bankruptcy.
• If you are unsure if a debt will be included in Bankruptcy then you should contact the Insolvency Service.

Will I lose all of my possessions?

• The Official Receiver will only consider selling certain possessions. Unless their individual worth is greater than the cost of a reasonable replacement then the following items will not be taken.
• Clothing, bedding and furniture.
• Basic household goods and equipment.
• Tools of trade.
• Vehicles that are used personally in your employment.
• Non-essential items with a high resale value will be taken and sold.
• Essential items that can be sold and replaced with a cheaper alternative may be taken.
• If your car is valuable then it could be taken and sold. In some circumstances the Official Receiver may allow you to buy a cheaper vehicle with some of the profits.

What will happen to my home?

• If you live in a mortgaged property or own your home outright then it may be sold.
• The Official Receiver does not have to do this straight away and you will have time to find alternative accommodation.
• The sale of a home during Bankruptcy proceedings is a complicated issue. More detailed information is available from the Insolvency Service.

What will happen to my tenancy?

• If you live in rented accommodation then your landlord will be informed of your Bankruptcy.
• You should check your tenancy agreement and seek legal advice to find out how your tenancy might be affected by Bankruptcy.

Can I give away or sell my assets?

• No. The Official Receiver will conduct a thorough investigation of your finances. If you give away your assets or sell them for less than the true value then the Official Receiver will find out and a Bankruptcy Restriction Order (BRO) could be placed upon you for two to fifteen years. A BRO would make you subject to Bankruptcy restrictions for this extended period.

Who will know?

• Your Bankruptcy will be reported in the legal notices of your local paper and in the London Gazette. This is not an attempt to ‘name and shame’ but rather gives any creditors who are not named on the petition the opportunity to come forward.
• The Official Receiver will contact all of the creditors named on the petition.
• The Official Receiver may also contact your utility providers. This is because your utility services may be provided on credit.
• The Official Receiver will also contact your landlord or mortgage provider.

What restrictions will be placed upon me?

• You will not be allowed to obtain credit of more than £500 without telling the lender about your Bankruptcy. This means that you must manage your accounts very carefully as both overdrafts and cheques are forms of credit.
• If you run a business then you must not trade under a different name without disclosing the name under which you went Bankrupt.
• You cannot act as director of a limited company or be involved in forming, promoting or managing a limited company unless you obtain permission from the court.
• You may not hold various public offices and cannot act as the trustee of a charity or pension fund.
• Various other restrictions may apply. More detailed information is available from the Insolvency Service.

How long will the restrictions last?

• The restrictions will normally apply until you are discharged from Bankruptcy. You will usually be discharged within 12 months.
• The Official Receiver can ask the court to make a Bankruptcy Restrictions Order (BRO). A BRO would make you subject to the restrictions for a further two to fifteen years.
• The Official Receiver will only do this if you have acted in a dishonest or blameworthy manner either before or during the Bankruptcy.
• More information about Bankruptcy Restrictions Orders is available from the Insolvency Service.

Will I lose my job?

• If you go Bankrupt then you will be automatically excluded from some professions...
• Member of the Law Society
• Estate Agent
• Insolvency Practitioner
• Stock Broker
• Pub Licensee
• For some other professions, dismissal would be at your employer’s discretion.
• Check your employment contract or consult your HR department or union.

What about my pension?

• You will need to inform your Official Receiver about all of your pension arrangements.
• State Pensions and pensions that have been approved for tax purposes by HM Revenue and Customs would not be included in the Bankruptcy.
• Other kinds of pensions can be excluded but you would need to discuss this with your Official Receiver.
• More information about pensions is available from the Insolvency Service. You should also discuss your arrangements with your pension provider.

What will happen to my credit rating?

• Bankruptcy Orders are kept on your credit file for six years.
• The Bankruptcy can be deleted from your credit file if...
• A Bankruptcy Order has been annulled by the court.
• You provide the Credit Reference Agency with the certificate.

Will I be able to use credit in the future?

• Until you are discharged from Bankruptcy, you cannot apply for credit of more than £500 without telling the lender that you are Bankrupt.
• If you have a Bankruptcy Order on your credit file, you will find it more difficult to obtain credit.
• A Bankruptcy Order may affect the interest rate that you are offered for any new credit agreement.

Will I be able to have a bank account?

• When the Bankruptcy Order is made...
• Your bank account will be frozen.
• You will have to stop using your cheque books and bank cards immediately and then give them to the Official Receiver.
• You will need to make alternative arrangements for receiving and making payments.
• Money in your account will be counted as an asset in your Bankruptcy estate.
• Overdraft accounts will be counted as debts.
• The Official Receiver can release money from your account for living expenses.
• After the Bankruptcy Order has been made...
• Your bank may agree to unfreeze your account but they do not have to do so.
• You may open a new bank account but you must tell the bank that you are Bankrupt.
• It is up to the bank or building society to decide whether to offer you an account.
• You may not obtain overdraft or credit facilities without telling the bank that you are Bankrupt.
• You may only be able to open a basic bank account. More information about basic accounts is available from the Financial Services Authority.
• If you have trouble opening a bank account...
• You can get benefits paid into a Post Office account.
• You can ask your employer to pay you by cheque.
• You could start saving with your local Credit Union.

Will my Bankruptcy affect anyone else?

• If you have joint debts that are not paid in full when you go Bankrupt, the other person will still have to repay the outstanding balance.
• Example: You and your partner have a joint loan with £2000 outstanding. The creditor is paid £500 from your Bankruptcy. You are no longer liable for the debt. Your partner is now liable for the full £1500 remaining.
• If someone has acted as a guarantor for a debt included in your Bankruptcy, the guarantor is liable for the full amount.
• A Bankruptcy Order is only listed on your individual credit file. It does not appear on or affect the credit file of...
• Your partner.
• Your children.
• Anyone else in your household.
• A Bankruptcy Order would affect future applications for joint credit.
• Example: You go Bankrupt and then apply for a joint loan with your partner who has not gone Bankrupt. It is likely that your Bankruptcy would affect the credit application.

I’m self-employed. How will Bankruptcy affect me?

• If you are self-employed or run a business then you may be able to continue trading. However, you must abide by the Bankruptcy restrictions.
• You must disclose your Bankruptcy before obtaining credit of more than £500.
• You must not trade under a different name without disclosing the name under which you went Bankrupt.
• More information is available from the Insolvency Service.

I live abroad. Can I go Bankrupt in the UK?

• Yes. If you live in an EU member state, except Denmark, you must show the court that your main centre of interest is in the UK.
• If you live in another part of the world then you can present a Bankruptcy petition in England and Wales if...
• You are present in England or Wales on the day you present your Bankruptcy petition.
• You have lived or carried on business in England or Wales in the previous three years.

What are the alternatives to Bankruptcy?

• Individual Voluntary Arrangements (IVA).
• Debt Management Plan.
• Administration Order.
• Full and Final Settlements.

I think Bankruptcy might be the option for me. What should I do next?

• Contact our Helpline to make an appointment with one of our counsellors. The counsellor will look at your circumstances in detail and recommend the best solution for your debt problems.
• You can find out if Bankruptcy is the best solution to your debt problems by using CCCS Debt Remedy.