Bankruptcy can feel like a daunting step to take, but it can provide a fresh start for those overwhelmed by unmanageable debt. The bankruptcy process is a legal procedure designed to help individuals and businesses that can no longer meet their financial obligations. While it’s not a decision to be taken lightly, it can offer a way out of severe financial trouble. 

In this guide, we’ll walk you through each step of the bankruptcy process in the UK, so you know what to expect, how long each stage typically takes, and how it can affect your financial future.

Step 1: Assessing Your Financial Situation

Before starting the process of bankruptcy, it’s important to thoroughly assess your financial situation, including your debt, assets, income and expenses. You’ll need to gather documents such as bank statements, loan agreements, and proof of income. This will help you see exactly where you stand financially and whether declaring bankruptcy is the best option for you.

It’s a good idea to consult a financial advisor or an Insolvency Practitioner (IP) at this stage who can help you evaluate your options. They can provide clarity on whether bankruptcy is the right choice or if alternative debt solutions may be more appropriate.

Step 2: Preparing Your Application

Once you’ve assessed your financial situation, it’s time to prepare your application for bankruptcy. You’ll need to complete a Statement of Affairs, which is a detailed record of your finances. This includes your debts, assets, income, and expenses. You’ll also need to provide supporting documents, such as pay slips, bank statements, court fines and loans. Therefore, it’s a good idea to have all the documentation ready before you start your online application.  

Step 3: Filing for Bankruptcy

With everything prepared, you can complete your bankruptcy application online through the Government website. After you’ve filled in the form, you’ll need to confirm you are the person named on the form, that the information is accurate and agree to a credit check.

You’ll need to pay a total fee of £680 before submitting the application, although this can be paid in instalments if needed. It’s then up to the adjudicator to decide whether to make a bankruptcy order or reject your application. They have up to 28 days to make this decision. 

Step 4: What Happens After Filing

If a bankruptcy order is made, your bank accounts will typically be frozen immediately and the Official Receiver (OR) takes control of your money and property. You will hear from them within 2 weeks to arrange an interview where you’ll explain your financial situation in more detail. It is their job to assess your finances and determine which assets, if any, can be sold to repay your creditors. 

You’ll also need to follow a number of restrictions, such as: 

• You won’t be able to borrow more than £500 without disclosing your bankruptcy
• You can’t act as a company director
• You can’t act as a trustee of a charity or pension scheme
• You can’t be the lasting power of attorney
• You can’t use the ‘right to buy’ scheme to purchase a property. 

Step 5: Completing the Process

Bankruptcy typically lasts 12 months in the UK. Once discharged, most of your remaining debts will be written off, and you can begin rebuilding your financial life. It’s important to note that certain debts, such as student loans and child maintenance arrears, aren’t covered by bankruptcy so you’ll need to continue paying them once discharged. 

Your records will be moved from the Insolvency Register 3 months after discharge but bankruptcy will remain on your credit file for 6 years. 

If you have more than £20 left in your bank account each month after income and expenses, you may be asked to make monthly payments to pay off your debts. This is known as an Income Payments Agreement (IPA) which lasts for 3 years in total and continues after discharge. 

When bankrupt, the Official Receiver takes control of your home and they have 3 years to take action. Your home will become yours again after those 3 years have passed if they haven’t: 

• sold your share to someone else, e.g. a friend or family member
• applied to the court for an order that you and anyone else living there has to leave
• applied to the court for a charging order
• made an agreement that you’ll pay them the value of your share.

The bankruptcy process can feel overwhelming, but understanding each step can make it less daunting. From assessing your financial situation to filing and eventually completing the process, each stage has its own set of challenges and timelines. 

If you find yourself in financial difficulty, consider seeking professional advice to help guide you through the bankruptcy process. You can get free debt advice from MoneyHelper or get in touch with us to discuss your options.