What happens when you go bankrupt UK?

When you are made bankrupt, an Official Receiver takes control of your assets and finances. Most of your unsecured debts are written off after 12 months (the discharge period). However, you may lose your home, valuable possessions, and savings. Your bank accounts are frozen, and you face restrictions on borrowing, certain jobs, and running a business. Bankruptcy stays on your credit file for 6 years.

Do you lose your house if you go bankrupt?

Not automatically, but you are likely to lose your share of equity in the property. The Official Receiver or trustee can sell your home if there is equity in it. If you have no equity (the mortgage is larger than the value), you may be able to keep the home. If another person owns the property jointly, the court must consider their interests too.

How long does bankruptcy last?

The bankruptcy period (during which restrictions apply) typically lasts 12 months from the date of the bankruptcy order. After 12 months, you are 'discharged' from bankruptcy and most debts are written off. However, a Bankruptcy Restrictions Order can extend restrictions for up to 15 years if you acted dishonestly or recklessly. Bankruptcy remains on your credit file for 6 years from the date of the order.

Can I get a bank account if I'm bankrupt?

Most banks will close your existing accounts when you are made bankrupt. However, you have a legal right to a basic bank account. Several banks offer basic accounts to people who are bankrupt, including Monzo, Starling, and high-street banks' basic account products. These accounts do not come with an overdraft or credit facility.

What Happens If You're Made Bankrupt in the UK?

Bankruptcy is a serious step that writes off most debts but comes with significant consequences. Here is exactly what happens, what you lose, and what alternatives you should consider first.

What Bankruptcy Means

Feature	Details
What it does	Writes off most unsecured debts after 12 months
Who controls your finances	An Official Receiver (government official) or appointed trustee
Duration	Restrictions last 12 months (usually)
Your assets	May be sold to repay creditors
Credit file	Bankruptcy recorded for 6 years
Cost to apply	£680 (as of 2026)

The Bankruptcy Process

Stage	What happens
1. Application	You apply online through the Insolvency Service (gov.uk) or a creditor petitions the court
2. Adjudicator decision	An adjudicator reviews your application and makes a bankruptcy order (usually within days)
3. Official Receiver takes over	OR contacts you, freezes accounts, and investigates your assets and income
4. Interview	You have a telephone interview with the Official Receiver about your finances
5. Income Payments Agreement	If your income is above essential needs, you may pay surplus income for 3 years
6. Asset realisation	Your non-essential assets may be sold
7. Discharge (12 months)	Most debts are written off and restrictions lifted

Which Debts Are Written Off?

Debts included (written off)	Debts NOT included (still owed)
Credit cards	Student loans
Personal loans	Court fines
Overdrafts	Child maintenance arrears
Catalogue debts	Debts from fraud
Store cards	Some tax debts (varies)
Payday loans	Secured debts (mortgage)
Utility arrears	Social fund loans
Council tax arrears	Debts incurred after bankruptcy order
Medical debts
Most HMRC debts

What You Lose

Your Home

Situation	What happens
Home with equity	Trustee can sell it (after 12 months, must apply to court within 3 years)
Home with no equity	You may be able to keep it (but situation reviewed)
Rented home	Bankruptcy does not affect your tenancy directly
Joint ownership	The other owner’s share is protected, but trustee can force a sale
Council/housing association	Tenancy is protected

If there is equity in your home, the trustee (or Official Receiver) has 3 years to deal with your interest in the property. If they take no action within 3 years, your interest reverts back to you.

Your Possessions

What you keep	What you may lose
Essential household items (bed, fridge, cooker, washing machine)	Valuable jewellery
Clothing	Expensive electronics (beyond everyday use)
Tools of trade (up to £1,000 in England, unlimited in Scotland)	Second vehicles
One reasonable vehicle (if needed for work, usually worth less than ~£1,000)	Art, antiques, collectibles
Basic furniture	Investment portfolios
Items needed for disability	Savings and ISAs

Your Income

Income level	What happens
Income covers essential living costs only	No payments required
Income exceeds essential living costs	You may be required to pay surplus income for 3 years via an Income Payments Agreement (IPA)
Essential living costs include	Rent/mortgage, council tax, food, utilities, transport to work, insurance
IPA typical deduction	Surplus above reasonable living costs

Your Bank Accounts

What happens	Details
Existing accounts	Usually frozen and may be closed
Basic bank account	You have a right to a basic account (no overdraft/credit)
Banks that offer basic accounts	Monzo, Starling, most high-street banks
Savings	Official Receiver will take savings above a minimal level
Pensions	Usually protected — pension funds are not normally included in bankruptcy

Restrictions During Bankruptcy

Restriction	Details
Borrowing	Cannot borrow more than £500 without disclosing your bankruptcy
Business	Cannot be a company director or manage a company without court permission
Trading name	Must disclose bankruptcy if trading under a different name
Certain professions	May be disqualified from some roles (solicitor, accountant, MP, police officer, etc.)
Bank accounts	Limited to basic accounts
Existing contracts	Some contracts (e.g. mobile phone) may be terminated

After Discharge (12 Months)

What changes	Details
Debt	Most unsecured debts are written off
Restrictions	Lifted (unless extended by a BRO)
Income payments	IPA may continue for up to 3 years from the date it started
Credit file	Bankruptcy recorded for 6 years from the order date
Getting credit	Very difficult for the first 6 years — improves gradually
Employment	Most job restrictions are lifted
Bank accounts	Can apply for standard accounts (but may still face refusals)

Bankruptcy Restrictions Orders (BROs)

Feature	Details
What it is	An extension of bankruptcy restrictions beyond the normal 12 months
Duration	2 to 15 years
Why imposed	Dishonest behaviour, reckless spending, hiding assets, gambling debts
What it means	Same restrictions as during bankruptcy continue for the BRO period
How common	Relatively rare — only for misconduct

Alternatives to Bankruptcy

Alternative	Best for	Lasts	Entered on credit file
Debt Relief Order (DRO)	Debts under £30,000, few assets, low income	12 months	6 years
Individual Voluntary Arrangement (IVA)	Regular income, debts over £6,000	Typically 5–6 years	6 years
Debt Management Plan (DMP)	Can afford reduced payments	Until debts repaid	May be noted
Administration Order	Debts under £5,000, CCJ already in place	Until debts repaid	6 years
Full and final settlement	Lump sum available to offer creditors	One-off	May be noted

Bankruptcy vs IVA

Feature	Bankruptcy	IVA
Duration of restrictions	12 months	5–6 years
Monthly payments	Surplus income for up to 3 years	Fixed monthly payments for 5–6 years
Your home	May be sold	Usually keep it (may need to release equity)
Debts written off	After 12 months	Remainder after IVA term
Credit file	6 years	6 years
Cost	£680 application	Fees taken from payments
Public record	Yes (Insolvency Register)	Yes (Insolvency Register)

Bankruptcy vs DRO

Feature	Bankruptcy	DRO
Debt limit	No limit	Up to £30,000
Asset limit	No limit (but assets at risk)	Under £2,000 (car under £2,000)
Income limit	No limit	Disposable income under £75/month
Cost	£680	£90
Duration	12 months	12 months

Scotland — Sequestration

In Scotland, the equivalent of bankruptcy is called sequestration. The process is similar but with some differences:

Scotland difference	Details
Name	Sequestration
Application route	Through the Accountant in Bankruptcy (AiB)
Cost	£150 (Minimal Assets Process) or £200 (full sequestration)
Discharge	Usually 12 months
Debt Arrangement Scheme (DAS)	Scottish alternative to DMP/IVA — statutory protection from creditors

Getting Free Debt Advice

Organisation	Contact
StepChange	stepchange.org — free, comprehensive debt advice
Citizens Advice	citizensadvice.org.uk
National Debtline	nationaldebtline.org
Business Debtline	businessdebtline.org (for self-employed)
Christians Against Poverty	capuk.org

Always get free professional debt advice before applying for bankruptcy. An adviser can assess whether bankruptcy, an IVA, or another solution is right for your situation.

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