What is personal bankruptcy?
Bankruptcy is a formal legal process in England and Wales for people who cannot pay their debts and have no realistic way of doing so. Once you're made bankrupt, most of your qualifying debts are eventually written off, but there are significant consequences for your assets, credit file and, in some cases, your ability to work in certain roles. It's generally considered a last resort, appropriate when other debt solutions genuinely aren't suitable — and free debt advice should always be sought before applying, since an adviser can confirm whether it's really the right option for your circumstances.
How to apply and what it costs
You can apply to make yourself bankrupt online through the government's adjudicator service (rather than through a court, as was previously the case). There is a fee to apply — currently in the region of £700 (check GOV.UK for the exact current figure, as fees are periodically reviewed) — which must usually be paid upfront and is not means-tested, meaning you need to find this money even though you're insolvent. Some people struggling to raise this fee look into whether a Debt Relief Order might be a cheaper, more suitable alternative instead.
The effects of bankruptcy
Bankruptcy has wide-ranging consequences, and it's important to understand them before applying.
Assets
An appointed trustee (usually the Official Receiver) takes control of most of your assets, including any equity in your home, savings, and valuable possessions, though everyday essential household items and tools needed for work are generally exempt. If you have a house with significant equity, bankruptcy can put your home at direct risk.
Credit file
Bankruptcy is recorded on your credit file for six years from the date you're made bankrupt, making it very difficult to get most forms of mainstream credit, including a mortgage, during that time and sometimes for a period afterwards.
Restrictions
While bankrupt, you're restricted from acting as a company director, and there are restrictions on certain professions and on obtaining credit above a set amount without disclosing your bankrupt status.
Discharge
Most people are automatically discharged from bankruptcy after 12 months, at which point you're normally free from the debts included in the bankruptcy (with some exceptions, such as certain court fines, child maintenance, and some student loans, which aren't written off). However, some restrictions — particularly around any assets still being dealt with by the trustee, such as ongoing payments from surplus income — can continue for longer.
Alternatives worth considering first
| Option | Best suited to | Key feature |
|---|---|---|
| Debt Relief Order (DRO) | Lower debts (subject to a set limit), minimal income and assets | Cheaper, lower barrier, debts frozen and later written off if circumstances don't improve |
| Individual Voluntary Arrangement (IVA) | Regular income, wanting to avoid bankruptcy and potentially keep a home | Formal agreement to repay a portion of debts over a set period, remainder written off |
| Bankruptcy | Little income or realistic repayment prospects, no significant assets to protect | Most debts written off after 12 months, but assets can be sold and credit file badly affected for 6 years |
A Debt Relief Order is generally cheaper and less severe, and may suit those with low overall debts and few assets. An Individual Voluntary Arrangement is a formal, legally binding agreement to repay a portion of your debts over an agreed period (often five to six years) and can sometimes let you keep your home. Both have their own eligibility criteria and consequences, so it's important to compare them properly with an adviser rather than assuming bankruptcy is the only option.
Always get free advice first
Because the consequences of bankruptcy are significant and not easily reversed, always speak to a free debt advice service — such as StepChange, National Debtline or Citizens Advice — before applying. An adviser can assess your full financial picture and confirm whether bankruptcy, a DRO, an IVA, or another route is genuinely the most suitable option for you.
Key takeaways
- Bankruptcy is a formal insolvency process that writes off most qualifying debts but puts assets, including home equity, at risk.
- You apply via the government's adjudicator service for a fee of roughly £700, which must usually be paid upfront.
- It stays on your credit file for six years and restricts you from acting as a company director while bankrupt.
- Most people are discharged after 12 months, though some ongoing payment obligations can continue.
- Consider a Debt Relief Order or an IVA first, and always get free debt advice before applying for bankruptcy.