Debt & Insolvency (Personal)

The main debt relief options in the UK are: Bankruptcy (12-month process writing off most debts), Individual Voluntary Arrangement/IVA (5-6 year payment plan), Debt Relief Order/DRO (12-month freeze for low income/assets), Debt Management Plan (informal arrangement), and direct negotiation with creditors. The best option depends on your income, assets, debt amount, and personal circumstances. Our specialist debt solicitors can assess your situation and recommend the most suitable solution to regain financial control.

Bankruptcy typically lasts 12 months and writes off most debts but affects your credit for 6 years and may result in asset loss including your home. An IVA lasts 5-6 years with monthly payments but lets you keep assets like your house and has fewer restrictions. Bankruptcy is quicker but more drastic, while IVAs protect assets but require longer commitment. IVAs need 75% creditor approval and typically write off 70-80% of debt. Choose bankruptcy for quick fresh start with few assets, IVA to protect property and maintain employment.

You can stop creditor harassment by: sending written notice requesting they cease contact, specifying your preferred communication method, documenting all harassment incidents, reporting to Financial Conduct Authority for regulated creditors, making complaints to Trading Standards, and seeking legal injunctions for serious cases. Creditors cannot call excessively, contact you at work after being told not to, discuss debts with third parties, or use threatening language. Our harassment specialists can take immediate action to stop unlawful practices and claim compensation for distress caused.

DRO eligibility requires: total debts under £30,000, assets under £2,000, vehicle under £2,000 value, monthly surplus income under £75, UK residence for 3 years, no homeownership (or equity under £1,000), no recent bankruptcy/IVA, and no business debts over £1,000. DROs cost only £90 and provide 12-month debt freeze with complete debt write-off if circumstances don't improve. It's the cheapest formal debt solution but has strict eligibility criteria. Our DRO specialists can assess your qualification and guide you through the application process with approved intermediaries.

Your house is at risk in bankruptcy as it becomes an asset of your bankruptcy estate. However, you may keep it if: there's no equity after mortgage and exemptions, the trustee decides it's not worth selling, you can buy back your interest, or your family can purchase the trustee's interest. The trustee must consider family circumstances and may delay sale for up to 3 years. If there's significant equity, the house will likely be sold. An IVA might be better to protect your home while dealing with debts through affordable monthly payments.

Bankruptcy stays on your credit file for 6 years from the date of the bankruptcy order. During this time, you'll find it difficult to obtain credit, mortgages, or rental properties. Some lenders may consider applications after 3-4 years with explanations and evidence of financial recovery. The bankruptcy itself usually lasts 12 months, but credit impacts continue longer. You can start rebuilding credit immediately with basic bank accounts, prepaid cards, and small credit products, gradually improving your score. Some employment positions also check for bankruptcy history.

Creditors and bailiffs cannot take essential household items including: basic furniture and bedding, clothing, children's toys, food and cooking equipment, medical equipment, tools needed for work (up to £1,350 value), vehicles essential for employment or disability, and items belonging to other people. They also cannot take goods on hire purchase, leased items, or jointly owned property. However, luxury items, expensive electronics, jewelry, and non-essential vehicles can be seized. Our specialists can advise on asset protection strategies and challenge inappropriate seizure attempts.

Ignoring a statutory demand for 21 days allows the creditor to file a bankruptcy petition, creating a presumption you cannot pay your debts. Once a bankruptcy petition is filed, you have limited defense options and face automatic bankruptcy if the petition succeeds. This results in asset loss, employment restrictions, and 6-year credit damage. You should respond within 21 days by: paying the debt, applying to set aside the demand (within 18 days), negotiating with the creditor, or seeking legal advice on challenging the demand's validity.

Bankruptcy costs include: £680 court application fee (payable in installments), potential Official Receiver deposit, and solicitor fees of £500-£2,000 for preparation and advice. Fee remission may be available for very low incomes. Additional costs during bankruptcy include trustee fees (if appointed) and potential income payments orders for 3 years if you have surplus income. While bankruptcy writes off debts, consider the total cost including lost assets, credit impact, and professional restrictions when comparing with alternatives like IVAs.

Getting a mortgage after an IVA is possible but challenging. Specialist lenders may consider applications immediately after IVA completion, while mainstream lenders typically wait 12-24 months. You'll likely need: larger deposit (25-40%), higher interest rates, proof of IVA completion certificate, stable employment history, and good payment record during the IVA. Some lenders consider applications during an IVA's final year. Mortgage brokers specializing in adverse credit can help find suitable products. Building savings and maintaining good credit behavior post-IVA improves your chances significantly.