Bankruptcy: how it works and what it means for you

Bankruptcy can give a genuine fresh start to someone with no realistic way of repaying, but it can also cost you your home, your car or your business, and it limits what you can do for at least a year. This guide covers England and Wales, with a short section on Northern Ireland. Scotland has different law (called sequestration): see debt solutions in Scotland.

Free, impartial debt advice is available from MoneyHelper, StepChange, Citizens Advice and National Debtline, and an adviser can help you with the application if bankruptcy is the right route. See where to get free debt advice.

How does bankruptcy work?

You can apply to make yourself bankrupt, or a creditor can apply to the court to make you bankrupt if you owe them £5,000 or more (or if you break the terms of an IVA). Most bankruptcies are debtor applications: 78% in the 12 months to July 2026.

Once you are made bankrupt:

• an official receiver from the Insolvency Service takes charge of your case and usually acts as your trustee (creditors can sometimes ask for a different trustee)
• your assets pass to the trustee, who can sell them to pay your creditors and the costs of the bankruptcy
• you may have to make payments from your income for up to 3 years
• you are usually discharged after 12 months, and most of your debts are released.

Bankruptcy is separate from a debt relief order, which is free, lasts 12 months, involves no trustee and is only for people with low income and few assets.

How do you apply for bankruptcy?

You apply online on gov.uk. There is no court hearing: since April 2016 debtor applications have gone to an adjudicator at the Insolvency Service, not a court.

The cost is £680, made up of a £130 adjudicator’s fee and a £550 deposit towards the Official Receiver’s fees. You can pay in instalments (National Debtline says of at least £5), but the full amount must be paid before you can submit the application. gov.uk does not list any fee exemption, even for people on benefits, but it says a charity may be able to help. If the adjudicator refuses your application, the £550 deposit is refunded (unless there is a review or appeal).

The adjudicator checks whether you meet the conditions and whether other money, such as savings or a pension, could pay your debts instead. You should hear within 28 days, though it can take longer if they have questions.

If you are at risk of violence, you can ask the court for an order that keeps your address off the public records before you apply. There is no fee for that application.

What happens after the bankruptcy order?

The official receiver usually contacts you within 2 weeks. You must give them full details of your income, debts, assets and anything valuable you own, and tell them about any change during the bankruptcy. They may interview you by phone, video call or in person, and then report to your creditors, which usually takes 4 weeks but can take up to 12. If you do not co-operate, your bankruptcy can be extended.

What happens to your home, car and money?

Your home

If your equity in your home is more than £1,000, the trustee can sell it or apply for a charging order against it. Whether they sell depends on how much would be left after the mortgage and other secured debts are paid.

• If you own the home alone, legal ownership passes to the trustee and you cannot sell it.
• If you own it jointly, your share of the equity passes to the trustee and a restriction is registered on the property. You still own it with the other owner.

You may be able to stop a sale if someone else, such as a partner or relative, buys your share from the trustee. A sale can be delayed for up to 1 year to give you time to find somewhere for children or a partner to live. If the trustee has not started to deal with the family home within 3 years, it usually passes back to you.

If you rent and are up to date with your rent, it is unlikely you will be asked to move out.

Your car and belongings

You can usually keep things you need for your job, such as tools or a vehicle, and essential household items such as clothing, bedding and furniture. You might have to give up an item, including a car, if it is worth more than a reasonable replacement. The trustee may then sell it and give you money for a cheaper one.

A car is generally kept only if you need it for work, for basic household needs or to care for someone, and other transport is not practical. Cars on hire purchase or conditional sale follow different rules: if the car is worth more than the finance owed, the trustee may sell it, and otherwise the finance company may take it back.

Your income

The trustee works out what you need for reasonable living costs. If there is money left over, you may be asked to pay it under an income payments agreement (IPA), or a court can impose an income payments order (IPO). Payments last up to 3 years and continue after you are discharged. If your main income is state benefits, you will not normally be asked for an IPA.

Bank accounts and pensions

Banks usually freeze your accounts when you become bankrupt and may use the money to pay debts you owe them. Your trustee can ask the bank to release money you need urgently. You can usually keep money you have already paid into a UK pension.

Will bankruptcy affect your job or business?

While you are bankrupt you cannot:

• borrow more than £500 without telling the lender you are bankrupt
• act as a company director, or create, manage or promote a limited company, without the court’s permission
• run a business without telling the people you deal with the name you were made bankrupt under.

Whether bankruptcy affects your job depends on the job. Some employers, jobs and professional bodies have their own rules about bankruptcy, so check your contract or your professional body’s rules before you apply rather than assuming either way.

If you are self-employed, gov.uk says your business is very likely to be closed unless the trustee decides to keep it open. You can usually keep tools and a vehicle you need for work, unless they are worth more than a reasonable replacement, and your employees can claim unpaid wages and redundancy pay. You can trade again after bankruptcy, within the restrictions.

If you break the rules or behave dishonestly, the restrictions can be extended beyond discharge by a bankruptcy restrictions order or undertaking.

Which debts are not cleared by bankruptcy?

Bankruptcy releases most unsecured debts, such as credit cards, loans and overdrafts. It does not clear:

• debts from fraud
• student loans
• secured debts such as a mortgage (the lender can still repossess if you do not pay)
• DWP budgeting and crisis loans.

Child maintenance, other family court debts and personal injury damages may also survive, unless the court decides otherwise.

How long does bankruptcy last, and what stays on record?

You are usually discharged automatically after 12 months. From then the restrictions end and you are released from the debts. It can take longer if you do not co-operate with the trustee. Income payments carry on after discharge until the agreement or order ends, and anything the trustee has not yet dealt with, such as your share of a home, stays with the trustee.

Bankruptcy leaves several records behind:

Many websites say bankruptcy stays on your credit file for 6 years from discharge. It is 6 years from the date you were made bankrupt.

Bankruptcy in Northern Ireland

Northern Ireland has its own law and a court-based process. You petition the High Court in Belfast yourself, with a statement of affairs. nidirect lists the costs as a £525 deposit, a £189 court fee and about £7 to swear your statement before a solicitor, around £721 in total. Check the current fees with the court before you apply, as they may have been updated.

A creditor can petition if you owe more than £5,000 in unsecured debt. Bankruptcy normally lasts one year, and you may be asked to make income payments for three years. Advice NI gives free debt advice in Northern Ireland.

What to do next

1. Get free debt advice before you apply. An adviser will check whether a DRO, a debt management plan or an IVA would suit you better. Our IVA vs bankruptcy guide and debt solutions compared set out the trade-offs.
2. If you own a home, a car of any value or a business, find out exactly what would happen to each before you apply.
3. If creditors are pressing you, ask the adviser about Breathing Space, which pauses most action for up to 60 days while you decide.