Bankruptcy

There's no minimum debt level required to declare bankruptcy in England and Wales. However, you must be unable to pay your debts as they fall due.

While you can technically apply for bankruptcy with any amount of debt, if you owe less than £5,000, other debt solutions like a Debt Relief Order or Debt Management Plan are usually more appropriate and cost-effective. For debts over £7,000 with regular income, an IVA often provides better outcomes than bankruptcy.

Bankruptcy can't stop an eviction if proceedings have already started or a possession order has been granted. If you own your home with equity, bankruptcy will likely result in the property being sold, effectively causing you to lose your home.

If you're renting and up to date with rent, bankruptcy shouldn't directly cause eviction, though some private landlords include clauses allowing them to end tenancies if you become bankrupt. If you're behind on rent, you will be given an allowance for the rent arrears, although those arrears can be included in your bankruptcy and written off in the event of your eviction, but this won't prevent eviction proceedings that are already underway.

Bankruptcy can seriously affect your employment. While most employees can continue working without issues, some sectors impose strict rules on bankrupts.

You cannot work in these roles while bankrupt:

• Company director (without court permission)
• Insolvency Practitioner
• Chartered accountant or solicitor (professional restrictions apply)
• Member of Parliament
• Magistrate
• Trustee of a charity
• Police officer (in some forces)
• Prison officer (in some regions)
• Financial services and insurance roles (depending on your license)

Even after discharge, some professional bodies and regulators require you to declare historic bankruptcy, which can affect licensing and career progression.

By contrast, an IVA has far fewer employment restrictions. Most professions allow you to continue working normally, and you're not required to inform your employer unless your contract specifically states otherwise.

Creditors can make you bankrupt if you owe them £5,000 or more and you've failed to pay after receiving a formal demand. The creditor must first serve you with a statutory demand giving you 21 days to pay or reach an agreement. If you don't respond, they can then petition the court to make you bankrupt. This process costs the creditor money (court fees and legal costs), so it's usually used as a last resort for larger debts.

If you are made bankrupt by a creditor rather than applying yourself, the outcome is largely the same - your assets are sold, you may face an Income Payments Agreement, and you're usually discharged after 12 months. However, being made bankrupt by creditors can sometimes be more stressful, as you have less control over the timing and may face additional costs if you contest the bankruptcy petition.

Yes, bankruptcy information is public record. When you're declared bankrupt, your details are added to the Individual Insolvency Register, which anyone can search online. The register includes your name, address, date of birth, occupation, and details about your bankruptcy. This information remains on the public register for three months after you're discharged (typically 15 months total).

No, bankruptcy does not clear student loans in the UK. Student loans are specifically excluded from bankruptcy and cannot be written off through this process. You'll continue to repay your student loan according to the standard terms even after being declared bankrupt.

The impact of bankruptcy on your home depends on whether you rent or own the property.

If you rent

Bankruptcy typically won't affect your tenancy provided you keep up with rent payments. Social housing tenants are especially protected, whilst some private landlords may include bankruptcy clauses in tenancy agreements, so check your contract.

If you own your home

Your home becomes part of your bankruptcy estate and transfers to the Trustee, who will assess the equity and usually apply to court for an order to sell. Proceeds go towards paying your creditors.

However, a sale might be avoided or delayed if:

• Your property is in negative equity
• A family member or friend purchases your share of the property
• You have dependents living with you (sale may be delayed up to 12 months)

After three years, any interest the Trustee hasn't dealt with returns to you, though they can still pursue a sale during that period.

Once you've submitted your bankruptcy application and paid the fee, it's very difficult to stop the process. The Insolvency Service will process your application unless there's a technical error or you withdraw it before approval.

After you're declared bankrupt, there are limited grounds for reversing the decision. You will either need to pay your debts in full, demonstrate that the grounds on which the order was made were incorrect, or propose an IVA that is accepted by the creditors included in the bankruptcy. Whilst you are taking steps to reverse the decision, the Official Receiver will proceed with selling your assets and managing your bankruptcy estate according to the law. This is why it's essential to explore all options before applying.

Whether you can keep your car in bankruptcy depends on its value and whether you need it for essential purposes like getting to work.

The general rule is:

• Cars worth less than £2,000 are usually exempt, and you can keep them
• Cars worth more than £2,000 may be sold unless essential for work
• If your car is necessary for employment, the Trustee may allow you to keep a vehicle worth up to £4,000

If you have car finance, the situation is different. The finance company owns the car until you've paid it off, so the Trustee cannot sell it. However, you'll need to continue making finance payments if you want to keep the vehicle.

In an IVA, you can typically keep your car if it's reasonable for your circumstances. Cars under £6,000 are generally acceptable, especially if needed for work or family transport. Higher values can be approved depending on your situation and the creditor's agreement.

Most people are discharged from bankruptcy after 12 months, but this may be suspended if you do not cooperate. If you have surplus income, you may be required to make payments through an Income Payments Agreement for up to three years. The bankruptcy also stays on your credit file for six years from the start date. In certain circumstances where you have been reckless, careless or misleading, the Official Receiver may apply to have the bankruptcy restrictions apply for a period of time after your discharge.