Bankruptcy (BKY)
Bankruptcy is a legally binding debt solution that’s often used as a last resort if you are having debt problems and you can’t repay your debts in a reasonable amount of time.
What is Bankruptcy?
You can choose to apply for bankruptcy yourself. In some cases, one or more of the companies you’re in debt to can petition to make you bankrupt – known as a bankruptcy order, or bankruptcy petition. In order for a bankruptcy order to be successful, you must owe a minimum of £5,000 in unpaid debt to creditors.
In order for a personal petition to be successful you must owe a minimum of £750 in unpaid debt to creditors.
Is there a set up fee?
It costs £680 in total to apply for bankruptcy in the UK. The price is broken down into two parts:
- £130 as an adjudicator fee
- A bankruptcy deposit of £550 (you will get this money back if your bankruptcy application is rejected)
You may be able to pay this money in instalments. Alternatively you can settle this fee upfront using a debt or credit card. It’s important to note that your bankruptcy won’t begin until you have paid this fee in full.
What happens when you go Bankrupt?
Once your application has been approved, the companies you owe money to are no longer allowed to contact you or take further legal action to get the debt repaid.
Being declared bankrupt usually involves selling things you own that are of high value, such as your car or house, for money to pay your debts. You may also have to make a monthly payment towards your debt if you earn enough.
Bankruptcies typically last for a year, and at the end, any remaining debt you have is written off.
However, details of your bankruptcy proceedings will be listed on the public insolvency register and can affect your career opportunities – for example, you won’t be able to direct a company.
Advantages & Disadvantages
Advantages
✅ Eliminates unaffordable debts
✅ Creditors accept less than they're owed
✅ Protects you from legal action
✅ Typically over with one year
✅ Administrator takes care of the process
Disadvantages
❌ You will lose assets like home and car
❌ Subject to creditor approval
❌ Includes bankruptcy fee
❌ You may be asked to make monthly payments
❌ Will impact your credit