Bankruptcy (BKY)
Bankruptcy is a debt solution that’s often used as a last resort if you are having debt problems and you can’t repay your debts in a reasonable amount of time.
What is Bankruptcy?
You can choose to apply for bankruptcy yourself. In some cases, one or more of the companies you’re in debt to can petition to make you bankrupt – known as a bankruptcy order, or bankruptcy petition. In order for a bankruptcy order to be successful, you must owe a minimum of £5,000 in unpaid debt to creditors.
In order for a personal petition to be successful you must owe a minimum of £750 in unpaid debt to creditors.
How does Bankruptcy work?
Once your application has been approved, the companies you owe money to are no longer allowed to contact you or take further legal action to get the debt repaid.
Being declared bankrupt usually involves selling things you own that are of high value, such as your car or house, for money to pay your debts. You may also have to make a monthly payment towards your debt if you earn enough. Bankruptcies typically last for a year, and at the end, any remaining debt you have is written off.
However, details of your bankruptcy proceedings will be listed on the public insolvency register and can affect your career opportunities – for example, you won’t be able to direct a company.
How much does it cost?
It costs £680 in total to apply for bankruptcy in the UK. The price is broken down into two parts:
- £130 as an adjudicator fee
- A bankruptcy deposit of £550 (you will get this money back if your bankruptcy application is rejected)
You may be able to pay this money in instalments. Alternatively you can settle this fee upfront. It’s important to note that your bankruptcy won’t begin until you have paid this fee in full.
Is Bankruptcy suitable for me?
Bankruptcy may be suitable for you if you are insolvent - meaning that you cannot pay your creditors when your bills are due or that your total debts are greater than the value of your assets.
Bankruptcy can have serious implications on your personal, financial and professional life and so should be considered carefully.
Ready to speak to an advisor?
It’s important to remember that no debt solution is perfect and there is no ‘one-size-fits-all,’ which is why we recommend speaking to one of expert debt advisors, completely free of charge, about your options and next steps.
BKY Pros
- All debts covered by bankruptcy are written off with a one-time administration fee.
- Normally you will be automatically discharged from bankruptcy after a maximum of one year.
- Once your Bankruptcy Order has been approved, an appointed administrator will take charge of everything for you, including handling all correspondence with your creditors.
- After filing for bankruptcy, you will have no further contact with your creditors.
- You are allowed to keep some items that are classed as ‘exempt goods’ such as tools you need to do your job, household items and a car if you need it to get to work.
BKY Cons
- In order to enter bankruptcy, you must pay a one-off administration fee of £680.
- Bankruptcy has an immediate impact on your credit score and will stay on your credit report for 6 years.
- Your bankruptcy will be published publicly.
- After entering bankruptcy, you will lose control of most of your assets including a home. You may be able to keep some items classed as 'exempt goods'.
- Employers and landlords may ask questions about recently-filed bankruptcies. Meaning you could potentially lose your job or your home and securing a job or a tenancy may be more difficult in the future.