What does Bankruptcy cost?
You should expect to pay around £600 to be able to declare yourself bankrupt. That includes:
- A unavoidable £450 deposit - this is a deposit for the Official Receivers and is designed to cover the cost of administering your bankruptcy. This fee must be paid and is unavoidable.
- A £150 Court Fee.
Is it possible you will you lose your home?
It is likely that you will lose your home in the bankruptcy process. Once you have declared bankruptcy, the Official Receiver is tasked with recovering as much money from your assets as possible. In this context, your house is probably your biggest asset, and will be targeted for liquidation first. If you do lose your house during bankruptcy, you may be able to apply for re-housing via your local authority.
There are debt solutions with lower risk
Losing your home should not be taken lightly. Bankruptcy is a serious financial move and all other options should be examined carefully. There are other, less extreme, debt solutions that won't risk your assets and home.
Will you lose your assets?
The Official Receiver in your bankruptcy will need to be informed about all of your assets. It will be their decision if you can keep any/all of your assets.
What can I keep?
Pension funds, tools required to do your job, and basic household items are generally exempt.
What could be taken?
Almost anything you own could be seized and sold by the Official Receiver. Worse, some assets are considered “unreasonable” - such as expensive boats or sports cars – and are certain to be sold.
Could you avoid declaring Bankruptcy?
It is important to consider all of your debt management options when you are struggling financially. Consider bankruptcy as your last resort – it should only be considered if you are able to deal with the long term effects it will have on your home, career, earnings, and credit rating.
Alternatives to consider
We offer guides on IVA's, Debt Management Plans, Trust Deeds, and Debt Relief Orders. One of these plans may be a better solution to your particular debt solution. Even better, try out our online tool to analyse your income, debt, home, income, and job status. Our system will automatically assess your unique situation and suggest the possible debt solutions for you.
How long does Bankruptcy last?
The bankruptcy process usually lasts for a year. In some cases, your case may be accelerated if you cooperate fully with the Official Receiver. However, if the Official Receiver finds you uncooperative, you might find yourself given a Bankruptcy Restriction Order. This type of order may delay your release from bankruptcy.
What effect will it have on your credit rating?
Your credit file will reflect your bankruptcy for at least 6 years from the day you declare bankruptcy. During the first year, it will be almost impossible to obtain new credit, but after that it will gradually become easier to obtain new credit.
What is a Bankruptcy Restriction Order?
If your Official Receiver believes you have been dishonest about your assets, a Bankruptcy Restriction Order may be imposed upon you.
When a court imposes a Bankruptcy Restriction Order (BRO), it will subject the debtor to certain restrictions for a set period between 2 and 15 years.
The restrictions are the same as every bankrupt will experience during a normal brankruptcy period, however a BRO will lengthen the time period of the bankruptcy restrictions.
Restrictions to expect during a bankruptcy are:
- You must declare you are bankrupt to a creditor if you are trying to obtain in excess of £500 credit
- You must inform potential business colleagues and associates the name, or trading style under which you were made bankrupt.
- You are restricted from acting as a company director, from taking part in its promotion, formation or management without the court’s prior permission.
- You may not act as an insolvency practitioner, or as the receiver or manager of the property of a company on behalf of debenture holders.
- You may not be a member of parliament in England or Wales.
Reasons for a Restriction Order
- Gambling or other frivelous spending.
- You took on debts in the knowledge that you wouldn't be able to repay them.
- You entered into what is known as a "Transaction at an Undervalue". This type of transaction means that you may have tried to sell your assets at a very low price in order to protect their liquidation by the Official Receiver.
- General lack of cooperation with the Official Receiver.
- If you are make debt payments to some creditors and ignore others.