Bankruptcy is a formal debt solution designed to help people in England and Wales who are unable to repay their debts. It can usually write off certain debts, typically after 12 months, if your circumstances don’t improve, but it should be viewed as a last resort due to the potential long-term implications on your finances. Once you’re declared bankrupt, most creditors will be unable to take legal action against you or request payment of any of the included debts.
If you have assets of significant value, such as property, at the time you apply for bankruptcy, they may be sold to repay your creditors. You may also be required to make payments towards your debts for up to three years if you have enough disposable income. Some debts, such as student loans, court fines, and child maintenance payments, cannot be included in a bankruptcy order.
A bankruptcy will be recorded on the Individual Insolvency Register and your credit file for six years, which can make it more difficult to access credit and open certain financial products. There are also certain rules you must follow while you’re bankrupt, which can be extended after bankruptcy if a restriction order or undertaking is made.
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Debt Relief Orders (DROs)
A Debt Relief Order (DRO) is a formal debt solution available in England, Wales, and Northern Ireland. It provides protection from creditors for 12 months, during which time interest and charges on included debts are usually frozen, and creditors cannot take enforcement action against you. If your financial situation doesn’t improve after 12 months, included debts will usually be written off.
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Individual Voluntary Arrangements (IVAs)
An Individual Voluntary Arrangement (IVA) is a formal debt solution available in England, Wales, and Northern Ireland. It allows you to repay your debts through manageable monthly instalments over a set period (typically five years). Once approved, interest and charges on included debts are usually frozen, and creditors generally cannot take legal action against you or contact you to request payment. Any remaining debts included in the IVA will typically be written off once you’ve successfully completed the arrangement.
Considering bankruptcy?
Our advisors will explain the pros and cons of each option, including any risks, costs, and impact on your credit file, so you can choose the solution that’s right for you.
