In England and Wales an individual can apply online to be made bankrupt for a fee of £680, or a creditor owed £5,000 or more can petition the court. Once the order is made, the bankrupt’s property passes to a trustee, usually the official receiver, who can sell valuable assets including the bankrupt’s share of the home and can claim spare income for up to three years. Discharge normally follows automatically after one year and releases most, but not all, debts.

How does someone become bankrupt?

There are two routes. A debtor can apply online, paying £680, which can be paid in instalments before the application is submitted. An Insolvency Service adjudicator checks whether the requirements are met and whether other money, such as savings or pension funds, could pay the debts instead, and normally gives a decision within 28 days. If the application is accepted the adjudicator makes the bankruptcy order and passes the case to the official receiver.

Alternatively a creditor can petition the court. Under section 267 of the Insolvency Act 1986 the debt or debts must be at least the bankruptcy level of £5,000, for a liquidated sum, unsecured, and a debt the debtor appears unable to pay or has no reasonable prospect of paying. Gov.uk explains that creditors usually have to try other legal routes first, normally a statutory demand or a court judgment. The court sets a hearing at least 14 days after the petition is given to the debtor, and a debtor who wants to oppose it must file form Bank 6 at least 5 days before the hearing. The supervisor of a failed individual voluntary arrangement can also petition (section 264(1)(c)). Scotland and Northern Ireland have their own systems.

What happens straight after the order?

The bankrupt’s name and address are published in the Gazette and on the Individual Insolvency Register. Someone at risk of violence can apply to the court for a person at risk of violence order so that the address is withheld, ideally before the order is made. The official receiver usually makes contact within two weeks, may interview the bankrupt by phone, video or in person, and reports to creditors, usually within four weeks but sometimes up to twelve. The official receiver normally acts as trustee throughout, although creditors can ask for a private insolvency practitioner to take over (see the insolvency practitioner’s role).

Banks usually freeze the bankrupt’s accounts and may set off money in an account against other debts owed to the same bank. Funds belonging to someone else, for example the other holder’s share of a joint account, are returned to them.

What happens to the bankrupt’s assets?

Section 283 defines the estate as all property belonging to the bankrupt when the bankruptcy starts. It excludes tools, books, vehicles and other equipment necessary for the bankrupt’s own use in their job or business, and clothing, bedding, furniture, household equipment and provisions needed for the basic domestic needs of the bankrupt and their family. Gov.uk adds that items worth more than a reasonable replacement can be sold, with a cheaper replacement bought or the money provided, and that a vehicle can usually be kept if other transport is impractical and it is needed for basic household needs, caring or work. Money previously paid into a UK pension can usually be kept.

Property acquired during the bankruptcy, such as an inheritance, can be claimed by the trustee by written notice under section 307, but not property acquired after discharge. The bankrupt must tell the trustee about any change in income or possessions.

What happens to the family home?

If the bankrupt is the sole owner, legal ownership passes to the trustee and a restriction is entered at HM Land Registry, so the bankrupt cannot sell. If the home is jointly owned, the bankrupt’s share of the equity passes to the trustee and a Form J restriction is registered. Gov.uk says that where the equity is more than £1,000 the trustee can sell or take a charging order, and section 313A requires the court to dismiss a sale, possession or charging application where the interest is below the prescribed low value. Someone else, such as a partner, may be able to buy the trustee’s interest, and a sale can be delayed for up to a year to arrange housing for children or a partner.

Under section 283A, if the trustee has not realised the interest, applied for sale, possession or a charge, or agreed terms with the bankrupt within three years, the interest in the home normally returns to the bankrupt. That three year clock starts later if the bankrupt does not tell the trustee about the property within three months of the bankruptcy.

What happens to income?

The trustee asks for details of the bankrupt’s income and spending, and their spouse’s or partner’s, and decides how much is needed for reasonable expenses such as rent or mortgage, bills, food, insurance and vehicle costs. Any surplus can be collected under an income payments agreement, which under section 310A may last up to three years from the date it is made and can continue after discharge. If the bankrupt will not agree, the trustee can ask the court for an income payments order. Gov.uk says an agreement is not normally sought where the main or only income is state benefits.

Illustration only. A bankrupt employee takes home £2,400 a month and the trustee accepts reasonable household spending of £2,100. The £300 surplus is collected under a 36 month income payments agreement, a total of £10,800, even though the bankruptcy itself ends after 12 months.

What restrictions apply while bankrupt?

  • Obtaining credit of £500 or more, alone or jointly, without disclosing the bankruptcy is an offence (section 360).
  • Acting as a company director, or taking part in forming or managing a company, without the court’s permission is an offence under section 11 of the Company Directors Disqualification Act 1986.
  • Trading under a name other than the one in which the person was made bankrupt requires disclosure of that name to everyone they do business with.
  • Other legislation disqualifies an undischarged bankrupt from acting as a charity trustee or a pension scheme trustee.

Where the official receiver finds dishonest or careless conduct, the restrictions can be extended for between two and fifteen years by a bankruptcy restrictions order or undertaking. For a self employed person gov.uk says the business is very likely to close unless the trustee keeps it open; employees can claim unpaid wages and redundancy pay (see redundancy pay from an insolvent employer). VAT Notice 700/56 says a bankrupt who keeps trading remains responsible for VAT returns covering periods after the bankruptcy.

When does bankruptcy end, and which debts survive?

Section 279 discharges the bankrupt at the end of one year from the start of the bankruptcy, but the court can suspend that period if the bankrupt fails to cooperate. Discharge releases the bankrupt from bankruptcy debts (section 281), but not from:

  • debts incurred through fraud or fraudulent breach of trust;
  • fines for offences;
  • personal injury damages and obligations under family proceedings or child maintenance, unless the court directs otherwise;
  • debts outside the bankruptcy, such as student loans and social fund budgeting or crisis loans.

Secured creditors keep the right to enforce their security. The trustee continues to sell assets after discharge, and income payments continue until they finish. The Individual Insolvency Register is updated within three months of discharge, the Gazette notice remains permanent but is excluded from search engine results after one year and three months, and the bankruptcy can stay on a credit file for six years. A bankruptcy can instead be annulled if the order should not have been made, if all debts and fees are paid or secured, or if an IVA is agreed.

What mistakes are common?

  • Ignoring a statutory demand, which is usually the step before a creditor’s petition.
  • Transferring property to family before bankruptcy. The trustee can ask the court to set aside transactions at an undervalue and preferences.
  • Assuming discharge ends income payments or the trustee’s interest in assets.
  • Carrying on as a director without permission.
  • Choosing bankruptcy without checking cheaper routes such as a debt relief order or first using a breathing space to take advice.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.