Last Updated on Mar 5, 2020 by James W

Person taking a penny from wallet - Bankruptcy

When you’re deep in debt, it sometimes seems like that’s no light at the end of the tunnel. With creditors hounding you for money, many in the same situation choose to make themselves bankrupt, or are made bankrupt by their creditors. While it is an easy way of making your debts more manageable, it should be considered only as a last resort.

If you owe £750 or more, your creditors can apply to the court to make you bankrupt, but you can apply to make yourself bankrupt if you are unable to cover your debts. Your assets will be used to pay your debts, and you must follow the rules of the ensuing 12 month bankruptcy period.

Going bankrupt can severely affect your life, so make sure you are making the right decision before you go ahead with it.

The rules

Declaring yourself bankrupt, contrary to popular belief, is not free. It can actually cost you up to £700 to declare yourself bankrupt – £175 for court costs, and the £525 fee for managing your bankruptcy. You may not have to pay the former fee if you are on income support.

You can’t apply to the court without paying these fees.

During the 12 month period following your bankruptcy, you won’t be able to borrow more than £500 without letting the lender know your financial situation. You also cannot start a business, act as a company director or work as a debt advice specialist.


To pay your debts, your assets will be sold. Your trustee – either an Official Receiver of the bankruptcy court or an authorised debt specialist – will take control of this.

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If you have items which you need to keep working, you may be allowed to keep them. You will usually be able to keep items such as bedding and furniture, unless the items in question can be replaced by a cheaper alternative.

If you are a homeowner, you may see your home used to pay for your debts. Non-homeowners may have more difficultly covering their debts with their assets – a recent study showed that a huge 77% of those filing for bankruptcy are non-homeowners. Whether it’s payday loans or credit cards which have got non-homeowners into debt, not having the asset of a home could prove troublesome during repayments.

If you are still considering bankruptcy, call the National Debt Line to find out if you have any other options. Becoming bankrupt can severely affect your life.


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