5 Pros and 5 Cons of Bankruptcies in the UK
For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.
For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

Table of Contents
- What is bankruptcy? Jump
- Voluntary Vs involuntary bankruptcy Jump
- Who can apply to be voluntarily bankrupt? Jump
- What debt can be included in voluntary bankruptcy? Jump
- What debt cannot be included in voluntary bankruptcy? Jump
- Who is the Official Receiver? Jump
- What happens when you’re bankruptcy is approved? Jump
- Will you be forced to sell assets? Jump
- What happens after your bankruptcy is discharged? Jump
- What are the pros and cons of bankruptcies? Jump
- Pros and cons of bankruptcies - Scotland! Jump
- What is the insolvency register? Jump
- Can you have a joint bankruptcy? Jump
- Can you take out a loan while bankrupt? Jump
- Can you get a mortgage after bankruptcy? Jump
- How much does bankruptcy cost? Jump
- How do you apply to be voluntarily bankrupt? Jump
- Is bankruptcy worth it? Jump
- Who can advise you on bankruptcy? Jump
- Alternative debt solutions to bankruptcy Jump
- Further debt support without the jargon! Jump
The pros and cons of bankruptcies in the UK are fully explained in my new post here.
It’s a common question and a smart question for anyone seriously considering getting out of debt with bankruptcy. It’s great that people always ask this question, just like Hueygeorge did here:

Source: https://forums.moneysavingexpert.com/discussion/481639/pros-and-cons-of-bankruptcy
Not only will I provide you with a comprehensive list of the pros and cons of bankruptcies, but I will also point you in the direction of further personalised support – which is free to boot!
What is bankruptcy?
Bankruptcy is a way to clear debts that you cannot afford to repay in a reasonable amount of time. It’s a type of insolvency solution and arguably the most “nuclear” method of getting out of debt.
At the end of the process, all debt will be wiped to give you a clean financial slate. But there are a lot of short-term and long-term consequences to be aware of.
However, despite its seriousness and sometimes its reputation, choosing bankruptcy might be the smartest choice for some debtors. It’s so important to do your own research when considering bankruptcy and getting debt advice, which is why I’m so glad you’re reading this first!
Do you have to pay?
There are ways to have debt written off in the UK.
If you genuinely can’t afford your debt repayments then looking into whether you could have your payments lowered or written off might be just what you need.
If you want to find out whether you qualify for having debt written off or payments lowered then fill out the short form below.
Voluntary Vs involuntary bankruptcy
Most people declare themselves bankrupt, which is known as voluntary bankruptcy. But in some cases, you can be forced into bankruptcy, which is known as – you guessed it – an involuntary bankruptcy.
Involuntary bankruptcy is when a creditor petition for you to be made bankrupt because you owe them £5,000 or more.
The other way you could be forced into bankruptcy is if you fail to keep to the terms of an Individual Voluntary Arrangement (IVA), which is a different type of debt solution.
Who can apply to be voluntarily bankrupt?
Anybody can apply to make themselves bankrupt if they believe they cannot afford to repay their debts in a reasonable amount of time and if no other debt solution is a better option.
The only real way to know this is to get debt advice, which I’ll return to later in this post.
Interestingly, there isn’t a minimum amount of debt you need to have to declare voluntary bankruptcy, but there might be a softer type of insolvency for debtors with no assets and less than £30,000 of unsecured debt. I’ll also be returning to this alternative later.

Can you lower your repayments?
If you’re struggling to pay back your debt, then you might qualify for a debt solution.
Some solutions lower your monthly payments while others write off a portion of your debt.
To find out whether they could work in your situation, hit the button below.
What debt can be included in voluntary bankruptcy?
Most unsecured and secured debts can be included within a bankruptcy, giving you a completely fresh start once the whole process is over. This includes personal loans, credit cards, utility arrears, mortgage arrears, rent arrears and much more.
But there are a couple of exceptions you must be aware of…
What debt cannot be included in voluntary bankruptcy?
Some debts cannot be covered by bankruptcy and you need to know which ones before applying. You won’t be able to include the following debts and arrears in your bankruptcy:
- Magistrate court fines
- Debts owed to the Student Loans Company
- Debts accumulated due to fraud
- Child maintenance arrears
- Money owed to another party as compensation due to injury
Who is the Official Receiver?
The Official Receiver is the person who oversees your bankruptcy from its start until even after you’re discharged.
You will need to follow the rules and orders made by the Official Receiver and maintain regular contact throughout.
What happens when you’re bankruptcy is approved?
If your bankruptcy application is approved, you’ll be placed under the restrictions of a bankruptcy order, which is put in place for a fixed length of time.
All your creditors and debt collectors, those as Global Debt Recovery and Lowell, won’t be able to contact you about the debts anymore.
You will have to live under strict financial restrictions as decided by the official receiver. And if you’re receiving an income, you’ll likely be asked to make payments to creditors as part of a payment plan called an Income Payment Agreement.
Will you be forced to sell assets?
Yes, you could be forced to sell your assets to help contribute to debt repayments. The official receiver will determine the specifics, but it’s possible you could lose your home and your car. Although, they might not be sold straight away.
There are assets that cannot be sold, such as those you need to keep for employment or those for maintaining an essential quality of life, such as furniture and white goods.
What happens after your bankruptcy is discharged?
Most people are discharged from their bankruptcy after 12 months, although some people’s bankruptcy discharge gets delayed, typically if the debtor doesn’t keep to the restrictions placed on them.
However, it’s important to know that everything isn’t immediately dandy once you’re discharged. For example:
- You might still be under restrictions in the bankruptcy order
- Your home could still be sold up to three years after being discharged
- You might still have to pay towards some debts for three further years as part of the Income Payment Agreement
Only once the bankruptcy order has ended and three further years have passed will you not be liable to repay the debt or give up assets for sale.
What are the pros and cons of bankruptcies?
When considering using bankruptcy to end your debt hell, you need to know all of the pros and cons and how these could affect you over the long term.
Improve your understanding with the lists below, and make sure you speak to a debt adviser when you don’t 100% understand.
The pros of bankruptcy
- The eligibility requirements to apply are minimal and you don’t even need to exceed a certain amount of debt. But it should only be used when most suitable.
- The application fee can be paid in instalments
- Creditors cannot take further action or even contact you
- If the bankruptcy is successful, the debts will be written off to give you a clean slate
- Free bankruptcy debt advice is available, which is essential before proceeding
The cons of bankruptcy
- There’s an application fee
- You will live under strict restrictions regarding finances
- Assets might be sold and you may need to pay creditors as part of an Income Payment Agreement. These are still possibilities up to three years after being discharged from bankruptcy. So, it’s not a quick debt fix!
- Your bankruptcy is publicly recorded and affects your credit rating
- Bankruptcy can affect some types of employment, mainly positions in finance.
Pros and cons of bankruptcies – Scotland!
Bankruptcy in Scotland is called Sequestration.
Although parts of the process are different to voluntary bankruptcy in England and Wales, many of the pros and cons of bankruptcy in Scotland are identical.
You can access a comprehensive list of these pros and cons by visiting this Citizens Advice Scotland page.
What is the insolvency register?
The insolvency register is a public register that lists all the people who are using an insolvency solution to deal with their debts. It includes the names and usually the addresses of the debtors.
If you declare yourself bankrupt, your details will appear on this public register which is freely available online. However, very few people will actually look for someone on the register and your friends or family are unlikely to go looking.
If you’ve been the victim of domestic abuse, you can make sure that your address doesn’t appear on the insolvency register to ensure your ongoing safety from the abuser.
Can you have a joint bankruptcy?
You can’t have a joint bankruptcy for personal debts. You can only have a joint bankruptcy for business debts when the other person is your business partner.
That being said, you can include a joint debt in your individual bankruptcy application. However, doing this has consequences for the other person who owns the debt but isn’t declaring bankruptcy.
It’s best to discuss this together, preferably with the support of a debt charity adviser.
Can you take out a loan while bankrupt?
Surprisingly, you’re legally allowed to take out a loan of up to £499 without being obligated to disclose that you’re bankrupt. But your Official Receiver might have added restrictions that prevent this.
In most cases, bankruptcy only requires you to declare your bankruptcy to the lender when trying to gain £500 credit or more. But in this case, the lender is likely to refuse you out of fear they won’t get repaid.
If you need more money during bankruptcy, it’s best to discuss this with your Official Receiver instead.
Can you get a mortgage after bankruptcy?
Bankruptcy stays on your credit file for six years and significantly reduces your credit score. You will find it more difficult to get approved for more credit, including a mortgage.
But it’s not impossible to get a mortgage after bankruptcy, especially if you have a stable income and haven’t accumulated other debts since.
There are even some mortgage lenders who advertise mortgages specifically for people with a poor credit history, including people who have used bankruptcy in the past.
How much does bankruptcy cost?
Right now, bankruptcy costs £680 but this can change over time. It used to cost less.
Sometimes there is financial aid available to low earners who want to use bankruptcy, which is best investigated online or with the help of Citizens Advice.
If you can’t get financial support to pay the application fee, you can pay in instalments. But note, the application isn’t actually submitted and considered until all £680 has been paid.
How do you apply to be voluntarily bankrupt?
There is only one way to apply for bankruptcy and that is using the online application tool on the government’s website.
If you decide to make an application, you can start yours here.
But before you do that. You should get free bankruptcy advice. Read on!
Is bankruptcy worth it?
Bankruptcy is a serious insolvency solution that has an immediate impact on your life, as well as longer-term consequences. But it can be the best way to clear unaffordable debts for some people.
Speak with a debt charity that offers free advice to know if it’s right for you, and to explore bankruptcy alternatives
Who can advise you on bankruptcy?
The best places to get free bankruptcy advice are:
- StepChange
- National Debtline
- Citizens Advice
These groups will assess your exact situation to help you decide if you should use bankruptcy.
At the same time, they will consider you for other debt solutions that may be more suited.
Alternative debt solutions to bankruptcy
There is a whole range of different debt solutions that could be a more suitable option than bankruptcy. One of those alternatives is a Debt Relief Order (DRO), sometimes referred to as a softer bankruptcy for unsecured debts only.
The only trouble is a DRO has stricter eligibility requirements. Your debt must fall below £30,000 at the time of application acceptance – not just the time of application – and you must have no valuable assets. Even your disposable income cannot exceed a certain monthly threshold.
But if you do qualify, all of your debts could be written off with no need for any repayments after just one year. The DRO blocks creditors from adding interest or making contact. And if your finances haven’t improved after the year is up, all debt is 100% wiped.

“It will only get worse” 😩
It’s cliché to say, but with debt it’s true; the longer you leave it, the worse the problem gets.
There are straightforward and effective ways to deal with debt, but you have to know your options.
Fill out the short form to find out about the debt solutions that could reduce your monthly payments or even write off some of your debt.
Further debt support without the jargon!
For more help dealing with debts, including HMRC debts and letters from debt collectors, don’t hesitate to explore more of my website.
I’m always adding new content to my site weekly to help you and other readers fight back with the right knowledge and your rights.