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How to File for Bankruptcy - Fleximize

How to File for Bankruptcy

The different stages and restrictions involved in filing for bankruptcy.

By Kate Josselyn

If you can’t pay your personal debts and you don’t feel that any other form of relief is suitable, the ultimate solution is bankruptcy.

Whilst the idea of wiping out debts may seem appealing, there are various restrictions to consider and it’s always best to seek advice from sources such as Citizen’s Advice Bureau or Money Advice Service before taking this drastic step.

Filing the petition

The first step to bankruptcy is the filing of the petition, statement of affairs and the relevant fees. You’ll need to file 3 copies of the petition at the appropriate court (you usually file the petition in your local county court). This must be done in person, but if you live or work in London and your debts are less than £100,000, you file the petition in the Central London County Court.

There are specific circumstances that mean you must file the petition, in the High Court at the Rolls Building. These are:

What happens next?

Once the petition is filed you’ll be told when your bankruptcy hearing is to take place. At the hearing the court will make the bankruptcy order – you’ll be bankrupt and a trustee in bankruptcy will be appointed.

Within 2 weeks of your bankruptcy, the official receiver will contact you via post with various questions. Your answers will be used to draft the report sent to your creditors. You may well be asked to attend an interview and it’s key to be honest and cooperate with the official receiver.

What happens to your assets?

Upon filing for bankruptcy, your assets, including your house, income, and bank accounts, must be provided to your trustee. They’ll decide whether to sell or retain them. While you’re allowed to hold on to tools, essential household items, and money to live on, other non-essential items are sold to release funds to clear your debt.

Restrictions

When you’re made bankrupt the court has the right to impose various restrictions on you during the term of bankruptcy. It’s a criminal offence to break the restrictions listed below:

Cancelling your bankruptcy

There are various times at which you can cancel your bankruptcy, these include repaying your debts in full, being wrongly made bankrupt or entering an IVA to repay your debts. In order to cancel your bankruptcy, you need to complete and file Form IAA. If you’ve fulfilled your obligations and the court is satisfied, you’ll be awarded an annulment order.

Ending your bankruptcy

Your bankruptcy will end when you’re officially discharged. This is normally 12 months after being made bankrupt. However, this can be extended at the discretion of the trustee.

Discharge is usually automatic and if you require proof, you’ll need to contact the official receiver for a certificate of discharge. This is done via Form LOC013. Your bankruptcy will stay on your credit report for up to six years.

See our articles on managing debt for more information.

Your common questions answered

Bankruptcy is a legal process that helps people who can’t pay their debts.

When you file for bankruptcy, a court steps in to manage your debts, often by selling your assets to pay off what you owe. It's a way to get a fresh start if you’re overwhelmed by debt.

Filing for bankruptcy can be a good way to start over if you have no other options to pay your debts. It can clear many debts, giving you a chance to rebuild your finances.

However, it can also have serious effects, like damaging your credit.

When you file for bankruptcy in the UK, a court reviews your case and may declare you bankrupt. A trustee is appointed to manage your bankruptcy, which might include selling your assets to pay your debts. You’ll also face restrictions on your financial activities during the bankruptcy process.

Yes, filing for bankruptcy can significantly hurt your credit.

Bankruptcy stays on your credit report for six years, making it harder to get loans, credit cards, or even some jobs. However, it also gives you a chance to rebuild your credit over time.

Bankruptcy can clear most types of debt, including what you owe to HMRC.

However, there are some exceptions, like certain fines and penalties, which may not be wiped out through personal bankruptcies.

You might lose your car when you file for bankruptcy in the UK if it's worth more than a certain amount. The trustee could sell it to pay your debts. However, if your car is essential for work or is of low value, you may be allowed to keep it.

Bankruptcy can clear many debts, but not all.

Debts like student loans, child support, and some fines usually aren’t cleared. It's important to understand what debts are covered before you file for bankruptcy.

After filing for bankruptcy, your credit will be very low.

However, you can start rebuilding your credit by paying bills on time and being responsible with new credit. It takes time, but good credit can be achieved again.

In the UK, the term bankruptcy specifically applies to individuals, not companies. For businesses, other insolvency procedures are used. Here are the main types:

  • Bankruptcy is for people who cannot pay their debts. It involves the sale of assets to repay creditors and usually lasts for 12 months.
  • An Individual Voluntary Arrangement (IVA) is an alternative to bankruptcy where you pay back what you can afford over a fixed period, usually five years.
  • A Debt Relief Order (DRO) is for people with lower debts, little income, and few assets. It freezes your debts for a year, and if your situation hasn’t changed after that, the debts are wiped out.

For companies, insolvency procedures like liquidation or administration are used instead of bankruptcy.

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