Guide to Bankruptcy
The process and the risks.

Bankruptcy is one way of dealing with debts you cannot pay. It frees you from overwhelming debts so you can make a fresh start, subject to some restrictions. It also ensures your assets are shared out fairly among your creditors.

How do you go bankrupt?
Bankruptcy petitions are usually presented either at the High Court in London or a County Court near to where you live or trade.

Your local court can give you the name, address and telephone number of the nearest County Court that deals with bankruptcy.

An individual can petition for their own bankruptcy or any creditor can make a bankruptcy order against a debtor. A bankruptcy order can still be made even if you refuse to acknowledge the proceedings or refuse to agree to them.

How much does it cost?
1) A court fee of £120. In some circumstances the Court may waive this fee; for example, if you are on Income Support.
2) A deposit of £250 towards the costs of administering your bankruptcy. This deposit is payable in all cases.
3) A fee to swear the statement of affairs. In a County Court, no charge is made to swear the affidavit, which is part of your statement of affairs. But in the High Court or before a solicitor there is a £7 charge.

What happens if you go bankrupt?
For a first-time bankruptcy within a 15-year period and for debts under £20,000, the procedure is known as a Summary Administration and you may be discharged after two years.
A first-time bankrupt with debts over £20,000 may be discharged after three years.

Is it worth going bankrupt?
While it may be tempting to think that declaring yourself bankrupt will 'deal' with all the financial problems you are facing, life isn’t that simple.
There are some important disadvantages to bankruptcy, including:
• You may lose any assets of real value including your home, life insurance and possibly pensions.
• While you are bankrupt, any assets you acquire – such as inheritances or insurance settlements – will be lost.
• Your building society, landlord and all other creditors will be informed immediately. All your bank accounts will be closed, credit cards taken away, HP agreements ended and goods such as cars taken away.
• You may lose your job and will certainly not be able to practise in some professional areas, including accountancy and the law.
• Even after you are discharged form bankruptcy, you may find it almost impossible to obtain credit for a long time.
It may still be 'worthwhile' to go bankrupt, but think about it carefully first.