Bankruptcy Help & Advice - Applying to Become Bankrupt in UK (2024)

Need help in Applying to become bankrupt? Our debt advisor will guide you on how to get out of debt easily and learn more about the bankruptcy process.

Bankruptcy is an important solution, helping indebted clients deal with the debts they are unable
to pay, having explored all other options.

Bankruptcy Process

The bankruptcy proceedings have two of the following main objectives:

To free the debtor from overwhelming debts so they can make a fresh start, subject to some restrictions;
To ensure that the debtor’s assets are shared out fairly among creditors.

Bankruptcy is the only solution that the debtor can force their creditors to accept less than is owed to them. A bankruptcy solution has far-reaching implications on the client, it is generally viewed as a solution of last resort.

Debt Exclusion

Certain debts will still have to be paid by the debtor:

Marital Settlements

Unpaid Court Fines

Student Loans

Bankruptcy Costs and Fees in the UK

In England and Wales:

The application fee is £130

The bankruptcy deposit is £550

In Northern Ireland:

The Court Fee
is £127

The bankruptcy deposit is £525

There is a solicitor’s fee of £7

If you live in Northern Ireland and you’re on a low income or receive certain benefits, the court fee may be waived. Whatever your circ*mstances the bankruptcy deposit always has to be paid.

Once you’ve petitioned for bankruptcy, the official receiver assigned to deal with your bankruptcy will look through your finances and decide if you need to pay anything towards your debts. You may have to pay a monthly contribution towards your debts for up to three years. This is called an “income payment arrangement” or IPA. It’s payable if you have an available income of more than £20 per month after paying your household bills and essential living costs.

The official receiver won’t make you pay anything towards your bankruptcy if you can’t afford to, and they’ll always leave you with enough money to live on each month.

The debtor’s valuable items, such as property, a vehicle, expensive items of jewelry or savings, the official receiver may arrange for them to be sold, and the money generated will be used to pay back some of your debts.

Bankruptcy Costs in Scotland

Sequestration (Scottish bankruptcy): the Accountant in Bankruptcy fee is £200. There are no exemptions or restrictions to this, so the total fee amount needs to be paid in full
Minimal Assets Process (MAP) bankruptcy: £90 application fee, again with no exemptions

In Scotland, the Accountant in Bankruptcy may order you to make a payment each month for up to four years after sequestration. This is called a “debtors contribution order” and is based on your ability to pay. You won’t be asked to pay anything after MAP bankruptcy.

The Features of Bankruptcy

Any creditor who is owed more than £5000 can petition for the debtor’s bankruptcy
The debtor can apply for his/her own bankruptcy
The supervisor of a failed IVA can petition for the debtor’s bankruptcy
The debtor may be required to make contributions to his bankruptcy if they have any disposable income
Bankruptcy could be the best option for debtors who have no assets and a low level of income/income made up solely/mostly of State Benefits
As of April 2004, most debtors will get an automatic discharge after one year, though, if awarded, income contributions may continue for up to three years
Bankruptcy is the way a debtor can force his creditors to accept less than is owed to them
In bankruptcy control of all the debtor’s assets passes to the TIB who may dispose of these for the benefit of his creditors

The Benefits For The Debtor

The debtor can’t relinquish personal belongings, tools of a trade, a modest motor vehicle, certain pensions or residential tenancy in bankruptcy
Income contributions have to be awarded if the debtor has any disposable income, but these may be lower than the level that would be required to maintain an IVA and will not continue for more than 3 years
Debtors, whose income is made up solely/mostly on state benefits are unlikely to have to make income contributions
Bankruptcy may provide a much speedier resolution of the debtor’s financial problems than other solutions

The Implications For The Debtor

During their bankruptcy the debtor may not:

Obtain credit of more than £500 without disclosing their bankruptcy
Carry on new or existing business in a different name from the name in which they were made bankrupt
Act as the director of a company or take part in its promotion, formation or management without the court’s permission
Act as an insolvency practitioner or as the receiver or manager of the property of a company on behalf of debenture holders
Be a Member of Parliament in England or Wales
Act as a local Councillor

Responsibilities of The Debtor Under Bankruptcy

The debtor must not make payments directly to his unsecured creditors. If any creditor requests payment from him, he must pass this on to the OR and tell the creditor that he is bankrupt.
You must make income contributions to the IP, if you have a disposable income and there is an IPO or IPA in place
The debtor must provide information about his financial affairs to the OR
You must collect and hand over his assets to the OR with any account books, records, bank statements, insurance policies and other papers relating to his assets and debts
The debtor must tell the OR about any assets and increases in income he receives during his bankruptcy
You must stop using his bank and building society accounts, credit cards and similar accounts straight away
The debtor must not obtain credit of £500 or more from any person without disclosing that he is a bankrupt.