What happens when You become Bankrupt?
People known as ‘adjudicators’ work with the Insolvency Service and oversee any applications for bankruptcy.
So, a primary role of an adjudicator is deciding whether you (as an individual) should be making yourself bankrupt.
But, the process differs if you are ‘being made bankrupt‘ by someone else (e.g. you failed to pay a debt over £5,000).
Note: Another section explains how to apply for bankruptcy online in England or Wales and the current costs for doing so.
After considering the application, the adjudicator may decide to make you bankrupt or set up an interview. Next, you will get a copy of the bankruptcy order, and:
- May have your assets sold to help pay off your debts.
- Have your name and other details published in the Individual Insolvency Register.
- Need to follow any relevant bankruptcy restrictions set in place.
You can search the bankruptcy and insolvency register to check for people who have gone bankrupt or for those who have signed an agreement to deal with their debts (England and Wales). The section below explains how to remove your address from the Individual Insolvency Register (e.g. if it would put you at risk of violence).
As a rule, it takes twelve (12) months to be discharged (released) from the debts and any associated bankruptcy restrictions. But, they can still use certain assets owned during the bankruptcy period to pay off a debt.
Where to Get Further Help and Information
- An overview of bankruptcy presented by the Citizens Advice Bureau.
- MoneyHelper for the best ways to pay off your debts.
- The National Debtline for free debt and bankruptcy advice.
Note: The Insolvency Service produces further guidance about options when a company is insolvent (e.g. when limited companies are unable to pay their creditors).
Filing for Bankruptcy in Scotland or Northern Ireland
The Accountant in Bankruptcy handles bankruptcy and insolvency cases in Scotland. But, you would need to get in touch with the Insolvency Service if you are living in Northern Ireland.
Applying for a Person at Risk of Violence Order
When you apply to make yourself bankrupt your name and address will be published in the Individual Insolvency Register and in the London Gazette.
In some cases, having an address published may put you at an increased risk of violence. If so, you can ask the court to issue a PARV order (e.g. to avoid having it available to the public).
Important: Even though they still publish your name, you must have already started the bankruptcy application process.
How to Apply for a PARV
You must use rule 20.5 bankruptcy application if you want to apply for an order for non-disclosure of a current address. Fill in the form and deliver it at the nearest court that deals with bankruptcy (there may be a fee).
Following that, the court will provide further details on how to attend a hearing to present your application to a judge. You should get the judge’s decision on the same day.
After Applying to Become Bankrupt
The adjudicator will send you an email or a written letter to confirm whether you have been made bankrupt – or not. In most cases, you should know within twenty eight (28) days of submitting the application.
Following that, the adjudicator issues a bankruptcy order (unless they need to ask more questions or get further information about your application).
The official receiver (e.g. officer of the court) will then send you a letter and an information pack within two (2) weeks. They might also ask you to:
- Attend an interview (conducted by the official receiver).
- Complete a questionnaire.
- Supply more information about your assets, creditors, income, and outstanding debts.
Attending an Interview
If you contact an official receiver, they may conduct an interview over the telephone or in person (face to face), for the purpose of:
- Asking for further details about how and why you became bankrupt (including what pensions or savings you have).
- Checking the information they received about your debts and assets.
- Responding to any questions that you have about the process of making yourself bankrupt.
Note: Failing to provide the details and information that they ask for may delay the discharge from bankruptcy (release).
When Bankruptcy Restrictions can be Extended
The official receiver can extend the restrictions through a bankruptcy restrictions order. They will be extended if you fail to (either):
- Act carelessly or dishonestly.
- Carry out the duties according to the bankruptcy proceedings.
They may use Bankruptcy Restrictions Orders and Undertakings to get an agreement from you – if they want to extend them.
Note: You can report misconduct by someone who is bankrupt to the official receiver or the Insolvency Service if they are working as a company director ‘illegally’.
Bankruptcy Restrictions
After applying to become bankrupt in England or Wales, you must follow the rules of bankruptcy. The restrictions mean you must provide any information required and you will not be able to:
- Act as a director of a limited company (unless you have permission from a court of law).
- Borrow more than £500 (unless you inform the lender that you made yourself bankrupt).
- Create, manage, or promote a company without getting permission from a court beforehand.
- Manage a business that is trading with a different name (unless you notify the people that you do business with that you are classified as bankrupt).
- Work as an authorised debt specialist (e.g. an insolvency practitioner).
Note: Because breaking a bankruptcy restriction order is a criminal offence, you can be prosecuted for doing so.
Handing Over Your Assets after Bankruptcy
Some items of value can be sold off to pay off bankruptcy debts. So, you would need to hand over your assets to the trustee (e.g. the person appointed to manage the bankruptcy).
As a rule, the official receiver (e.g. officer of the court) will act as a trustee in the beginning. But, the role might also pass over to an insolvency practitioner (e.g. an authorised debt specialist).
Assets You Can Keep
The assets that you can keep after making yourself bankrupt (unless they are valued higher than a reasonable replacement), include:
- Items needed to carry out your work (e.g. tools, a vehicle).
- Most household items (e.g. bedding, clothing, furniture).
Bank Accounts after Bankruptcies
The official receiver will ask you to hand over bank cards, cheque books, and credit cards for accounts that are banned from use (including any overdrawn accounts at the bankruptcy date).
Even though they will freeze your accounts, the trustee has the power to release:
- Emergency money (e.g. so you can buy food).
- A partner’s share of money held in a joint account.
The relevant bank or building society will decide whether to freeze your accounts or allow you to continue using them.
Money Held in Pensions
You should be able to retain money you put into a pension. Even so, pension payments made to someone while they are bankrupt will usually count as ‘income’.
Note: The Insolvency service produces a Guide to Bankruptcy that explains more about what will happen when you have been made bankrupt.
Bankruptcy and Your Home
Your equity is the share that you have left after any paying off any secured debts (e.g. a mortgage). This is the amount that determines whether they will sell your home after you make yourself bankrupt.
Hence, you may need to relinquish (give up) your equity as well as your legal ownership of the property that you own if your equity is £1,000 or more.
But, ownership of the property will be transferred back to you if the trustee has not tried to sell your home within three (3) years.
If You are the Sole Owner
As the sole owner, because the equity and legal ownership will be transferred to your trustee, they will not allow you to sell the property (or claim any money from selling it).
Furthermore, they will confirm this through a placement of a bankruptcy restriction or notice being added to the entry in the land register.
You will not be able to remove it unless they added it as an error. You can correct a mistake by sending a signed statement to HM Land Registry that you are not bankrupt (e.g. using the application to change the register (AP1) for properties).
Joint Ownerships
If there are joint owners the equity will be transferred to the trustee and they will add a ‘Form J restriction’ to the property’s entry in the land register.
Simply put, doing so means the trustee will be notified about any dealings connected with the property (e.g. if you put it up for sale).
You would need to prove that you (as the person who is made bankrupt) does not have any share in the property (e.g. your partner owns it) to have it removed.
The owner would need to send a signed statement to HM Land Registry stating they are not the bankrupt person along with registration (RX3) – which is an application for the cancellation of a Form J restriction.
How to Stop or Delay the Sale of a Home
It may be possible to delay, or completely stop, the sale of your home, such as if your equity is valued less than £1,000, or:
- You can sell the equity or legal title to someone else (e.g. your partner).
- There is a need to have it as housing for children or a partner. In this case you may be able to delay the sake for up to one (1) year).
Even though you may be able to get legal aid, it may be best to get legal advice about stopping the sale of your property after becoming bankrupt.
If You are in a Rented Property
As a rule, your landlord will be notified about your bankruptcy if you are renting. Thus, it may affect your rental situation.
How Bankruptcy affects Your Income
If you can afford to do so, the trustee may tell you that you need to make monthly payments from any of your ‘spare’ income (including pension payments). An Income Payments Agreement (IPA) can last for a period of up to three (3) years.
The trustee can ask a court to issue an Income Payments Order (IPO) if you disagree with the details set out in the IPA – and charge you for doing so.
How Much You Will Pay Each Month
As a general rule, the monthly amount you would pay is calculated after deducting your essential expenses (e.g. food and utility bills).
How to Cancel a Bankruptcy?
You may have valid grounds for canceling your bankruptcy (through an annulment order) if they should not have made the bankruptcy order, or:
- A third party pays, or guarantees to pay, your debts and any outstanding bankruptcy fees.
- You made an Individual Voluntary Arrangement (IVA) with your creditors to pay part (or all) of the amount owing.
What if your circumstances change and you have an opportunity to pay off all the debts? If so, to avoid following the bankruptcy restrictions, you would need to pay it through the official receiver or through a solicitor.
To apply, you must follow the proper steps for insolvency issues and use (‘application notice IAA‘). Fill in the form and send it (or hand deliver it) to your nearest court that handles bankruptcies. You can also notify the court to have details about the bankruptcy removed from the Land Charges register.
You would need to attend a court hearing about your application and you may also need to attend an interview with the official receiver.
Advertising a Bankruptcy Cancellation Order
The official receiver can advertise an annulment order within twenty eight (28) days of you getting it. They will advertise the annulment order wherever the bankruptcy order got issued.
When Does a Bankruptcy End?
Bankruptcies end, along with any associated restrictions, once you get ‘discharged’. The ending of bankruptcies is usually an ‘automatic’ process.
As a rule, bankruptcy ends twelve (12) months from the date that the adjudicator made you bankrupt. However, failing to co-operate with the trustee can extend the process. The Individual Insolvency Register allows you to check a discharge date online.
Important: Canceling a bankruptcy will end all restrictions with immediate effect and remove your details from the Individual Insolvency Register.
Proving Your Bankruptcy has Ended
You can email the Insolvency Service to get a free proof of discharge. Ask them to give you a ‘confirmation letter’ so you can prove your bankruptcy has ended.
Insolvency Service
Mail: [email protected]
You may also need to get a Certificate of Discharge if you are applying for a mortgage. The way you applied for bankruptcy will determine how to get it, such as:
- From the same court if that’s how you applied (there is a fee).
- By emailing the Insolvency Service if you applied online (this service is free).
Updating the Bankruptcy Registers
They will update the Individual Insolvency Register within three (3) months of a discharge. But, you would need to apply to Land Charges as well as HM Land Registry to have a bankruptcy entry removed from any properties that you still own (after you paid off your debts).
Note: They remove bankruptcy entries from the Land Charges register by automatic process after five (5) years.
Applying to Land Charges
You must use application form K11 to cancel an entry in the Land Charges Register. Remember to include a copy of the court order that allows the ‘vacation’ of the entry and the payment for each entry that you want to cancel.
Land Charges Department
Seaton Court
2 William Prance Road
Plymouth
PL6 5WS
Applying to HM Land Registry
- Use application form RX3 to cancel a restriction (if you are a joint owner).
- Use the AP1 form to change the register for a property (if you are the sole owner of the property).
HM Land Registry Bankruptcy Unit
Seaton Court
2 William Prance Road
Plymouth
PL6 5WS
They will destroy all forms after they update the bankruptcy registers. Write “I certify that this is a true copy of the original” next to your signature if you are using copies.
Credit Records
Credit reference agencies get information about the ending of bankruptcies from public records. But, you can get a copy of your credit reference report from the Information Commissioner’s Office (ICO).
Note: Bankruptcies can stay on a credit reference file for up to six (6) years from the date of the bankruptcy.
Debts that Do Not get Written Off
You will get released from most of the debts when you get discharged. But, they will not release you from debts that occur from fraud, or:
- Anything owed under family proceedings (unless decided otherwise by a court of law).
- Damages for personal injuries caused to someone (a court may decide otherwise).
- Debts not included in the bankruptcy itself (e.g. a debt owed to the Student Loans Company).
Related Help Guides
- Being disqualified as a director of a company.
- Options for paying off your debts.
- What help can you get if you cannot pay your debts?
Note: This short video presented by The Insolvency Service explains what happens after a bankruptcy order is made in England and Wales.