Bankruptcy: how it works in England and Wales

What is bankruptcy?

Bankruptcy is a legal process in England and Wales that writes off most of your unsecured debts when you cannot pay them, in return for your assets being used to repay your creditors and restrictions that usually last one year (Insolvency Act 1986, section 279 (opens in a new tab); GOV.UK (opens in a new tab)).

Only individuals can become bankrupt, and this page covers England and Wales; GOV.UK notes (opens in a new tab) that the process is different in Scotland and Northern Ireland. A limited company that cannot pay its debts goes through a different procedure.

Bankruptcy is one of several ways to deal with debt, and GOV.UK points out that other options restrict what you can do less (opens in a new tab). Before you decide, compare your options for dealing with debt, from a debt relief order to an Individual Voluntary Arrangement.

Some debts survive it, and the section on which debts bankruptcy does not clear lists them.

Who can apply for bankruptcy?

You can apply for your own bankruptcy if you are unable to pay your debts and you have a real connection with England and Wales: your main interests are here, you are domiciled here, or in the three years before you apply you lived, had a home or carried on business here (section 263H (opens in a new tab); section 263I (opens in a new tab)).

A creditor can also ask the court to make you bankrupt, but only for unsecured debts that add up to £5,000 or more, the amount the Act calls the bankruptcy level (section 267 (opens in a new tab)). That usually starts with a statutory demand, and our guide to statutory demands and bankruptcy petitions sets out the deadlines. The supervisor of an IVA can petition too, if you break the terms of the arrangement (section 264 (opens in a new tab)).

You make the application yourself, online, and how to apply for bankruptcy walks through each step. Our licensed insolvency practitioners do not submit bankruptcy applications for people. What they can do is talk through whether bankruptcy or an IVA fits your circumstances before you apply.

What happens when you are made bankrupt?

When you go bankrupt, the official receiver usually deals with your bankruptcy and can sell valuable possessions; you are usually freed from most of your debts when the bankruptcy ends, normally after 12 months; and if you have spare income you may have to make monthly payments for up to 3 years (GOV.UK (opens in a new tab); section 279 (opens in a new tab); GOV.UK (opens in a new tab)).

The official receiver usually contacts you within 2 weeks of the bankruptcy order and asks for details of your finances, your debts and everything valuable you own.

Your name and address are published in The Gazette and on the Individual Insolvency Register. If publishing your address would put you at risk of violence, you can apply for a court order that keeps it private; apply before you submit your own application, or before the hearing if a creditor has petitioned (GOV.UK (opens in a new tab)).

While you are bankrupt you must not borrow £500 or more without telling the lender, and you cannot act as a company director without the court's permission. Our guide to how long bankruptcy lasts and the restrictions while it does covers these in full.

What does bankruptcy cost?

Applying for your own bankruptcy costs £680, made up of a £130 adjudicator’s fee and a £550 deposit towards the official receiver’s costs, and the application can only be submitted once the full amount is paid (GOV.UK (opens in a new tab); the Insolvency Proceedings (Fees) Order 2016 (opens in a new tab)).

There is a further cost that you do not pay upfront. When a bankruptcy order is made on your own application, the official receiver’s administration fee is £2,390, and on a creditor’s petition it is £3,300; these come out of whatever the trustee recovers from your assets and income (Schedule 1, as checked on 4 November 2026 (opens in a new tab)).

If you are struggling to find the £680, GOV.UK says a charity may be able to help.

What happens to my home and belongings?

Your share of your home passes to the trustee, who can sell the property or apply for a charging order if your equity is more than £1,000, and if the trustee has not dealt with it within 3 years it usually passes back to you (GOV.UK (opens in a new tab); section 283A (opens in a new tab)).

You can usually keep the things you need for your job, such as tools or a vehicle, and essential household items like clothing, bedding and furniture. The trustee can sell items worth more than a reasonable replacement and buy you a cheaper one, or give you the money for it (GOV.UK (opens in a new tab)).

Joint ownership, renting and a family member buying your share all change the picture, so we have set them out in a separate guide: what happens to your house if you go bankrupt.

How long does bankruptcy last?

Bankruptcy usually lasts 12 months: you are discharged automatically one year after it starts, unless the court suspends your discharge because you have not co-operated with the official receiver or trustee (section 279 (opens in a new tab); GOV.UK (opens in a new tab)).

Some effects run longer. An income payments agreement can last up to 3 years (section 310A (opens in a new tab)), a bankruptcy restrictions order can keep the restrictions in place for 2 to 15 years (Schedule 4A (opens in a new tab)), and the bankruptcy can stay on your credit reference file for 6 years from its start (GOV.UK (opens in a new tab)). See how long bankruptcy stays on your credit report for each public record.

If you are weighing bankruptcy against an IVA, IVA vs bankruptcy sets the two side by side, including the cost, how long each lasts and what happens to your home. Both affect your credit rating, and both carry fees.

Which debts does bankruptcy not clear?

Bankruptcy does not clear debts from fraud, most court fines, child maintenance and family court orders, student loans and some other debts listed by GOV.UK (Insolvency Act 1986, section 281 (opens in a new tab)).

GOV.UK’s list, read on 4 November 2026, says that when you are bankrupt you must continue to pay these (GOV.UK, Your money and income (opens in a new tab)):

• “debts you have from fraud you’ve carried out”
• “debts which were not included in the bankruptcy itself, for example to the Student Loans Company”
• “secured debts, like a mortgage if you continue to live in a mortgaged property”
• “money owed to the Department for Work and Pensions for budgeting or crisis loans”
• and you “might still have to pay” “anything you owe under family proceedings, like child maintenance debts” and “damages for personal injuries to anyone”, unless the court decides you do not have to

Will I have to pay from my income if I go bankrupt?

If you go bankrupt and your income is more than your reasonable living costs, you may have to pay the surplus to your creditors through an income payments agreement or order for up to three years (section 310A (opens in a new tab); section 310 (opens in a new tab)).

The trustee works out what you need for rent or mortgage payments, bills, food, clothing and other essentials, and you only make payments under an agreement if you and the trustee agree you can afford them. If you do not agree, the trustee can ask the court for an income payments order, which cannot leave you with less than the court thinks your household reasonably needs. If your main or only income is state benefits, the trustee will not normally ask for an agreement (GOV.UK (opens in a new tab)).

Payments carry on after discharge until the agreement or order ends.

Can I keep a bank account if I go bankrupt?

When you go bankrupt your bank will usually freeze your accounts and decide whether you can keep using them, and it can use money in them to pay debts you owe it, which is called set off (GOV.UK (opens in a new tab)).

You can apply for a basic bank account. Designated banks must offer one to consumers legally resident in the UK who meet the eligibility rules (Payment Accounts Regulations 2015, regulation 23 (opens in a new tab); regulation 25 (opens in a new tab)).

If you need money from a frozen account urgently, for food for example, the trustee can ask your bank to release it. Money in a joint account that belongs to the other account holder is given to them.

Can I be a company director if I am bankrupt?

An undischarged bankrupt cannot act as a company director or be involved in managing a company without the court’s permission (Company Directors Disqualification Act 1986, section 11 (opens in a new tab)).

The same ban applies while a bankruptcy restrictions order or undertaking, a debt relief restrictions order or undertaking, or a debt relief order moratorium is in force. Breaking it is a criminal offence (GOV.UK (opens in a new tab)).