Bankruptcy

The bankruptcy process involves: online application with £680 fee, automatic bankruptcy order (usually same day), Statement of Affairs completion, Official Receiver interview, asset assessment and potential sale, monthly income review, creditor correspondence via OR/trustee, and discharge after 12 months typically. During bankruptcy, most debt collection stops, bank accounts may be frozen initially, and you cannot act as company director. Assets vest in OR/trustee who may sell non-essential items. Most people are discharged after 12 months with remaining qualifying debts written off, though income payments orders may continue for 3 years.

Your house becomes part of the bankruptcy estate, but you may keep it if: there's little or no equity after mortgage and exemptions, costs of sale exceed likely recovery, your family can buy the trustee's interest, or you can purchase your beneficial interest. The trustee must consider family circumstances and may not pursue sale if financially unviable. However, if significant equity exists, sale is likely. Alternatives like IVAs might better protect your home. The trustee has up to 3 years to decide on property matters, during which time you can often remain in the property.

Bankruptcy usually lasts 12 months from the bankruptcy order date, after which you're automatically discharged and most debts are written off. However, some consequences continue longer: bankruptcy stays on credit files for 6 years, certain debts survive discharge (student loans, court fines, family maintenance), and income payments orders can last 3 years. Professional restrictions may apply during bankruptcy and sometimes beyond. The actual bankruptcy process involves ongoing obligations like providing information to the Official Receiver and potential trustee throughout the 12-month period and cooperating with asset realization.

Alternatives to bankruptcy include: Individual Voluntary Arrangement (IVA) for asset protection with affordable payments over 5-6 years, Debt Relief Order for low income/asset situations costing only £90, Administration Orders for debts under £5,000, Debt Management Plans for informal creditor arrangements, and direct negotiation for lump sum settlements. Each has different eligibility criteria, costs, and outcomes. IVAs protect assets but require longer commitment, DROs suit minimal income situations, while debt management plans offer flexibility without legal protection. Our specialists assess your circumstances to recommend the most suitable option.

Bankruptcy affects certain employment sectors more than others. You cannot work in financial services, act as company director, work as insolvency practitioner, or hold certain professional licenses (solicitor, accountant) during bankruptcy. Some employers conduct credit checks, and public sector positions may have restrictions. However, most employment is unaffected, and discrimination based solely on bankruptcy is generally unlawful. You must inform employers if contracts specifically prohibit bankruptcy. After discharge, employment restrictions largely end, though some professional bodies have ongoing requirements. Consider employment impact when choosing between bankruptcy and alternatives like IVAs.

You can travel abroad during bankruptcy, but there are some restrictions: you must inform the Official Receiver/trustee of travel plans, some countries (mainly USA, Australia, Canada) may refuse entry to bankrupt individuals, you cannot obtain credit for travel without disclosure, and you may need permission for extended trips. The restrictions are practical rather than legal - your passport isn't confiscated, but entry to certain countries may be denied at their discretion. Business travel and holidays are generally permitted with proper notification. After discharge, travel restrictions end, though bankruptcy remains on some international databases.

Debts that survive bankruptcy discharge include: court fines and criminal confiscation orders, child maintenance and CSA arrears, student loans (unless exceptional hardship), damages for personal injury caused by drunk driving, fraudulently obtained debts, and debts arising from fraud or breach of trust. Most other debts are written off including credit cards, personal loans, overdrafts, utility arrears, benefit overpayments (usually), and business debts. Secured debts like mortgages continue but excess after property sale is written off. Recent debts obtained through false information may survive if proven fraudulent.

Bankruptcy severely impacts credit rating, staying on credit files for 6 years from the bankruptcy order date. During this period, obtaining credit is very difficult and expensive, with most mainstream lenders refusing applications. You may access: basic bank accounts, prepaid cards, some specialist credit cards with high interest rates, and hire purchase agreements. Credit rebuilding starts immediately through demonstrating financial responsibility. After 3-4 years, some lenders consider applications with higher deposits/interest rates. Post-6 years, bankruptcy is removed but may still affect premium products. The impact lessens over time with good financial behavior.