Considering bankruptcy and insolvency is not an easy decision. If your debts have become debilitating, however, it can be a viable solution to your financial difficulties. Reform Debt Solutions recommends reading this guide to help you understand the process as well as consider your options when making decisions about your financial situation.

In this guide, you will find lots of information about how bankruptcy works, weigh the pros and cons of bankruptcy, and ultimately decide if this is the right avenue to take. We know how scary and overwhelming debt can be, and we want to help you get back on track to secure your financial future.

What is Bankruptcy?

Bankruptcy is a form of insolvency. It is a legal process that allows you to resolve unmanageable debts. This allows you to write off debts that you cannot pay and may involve selling certain assets. Reform Debt Solutions recommends consulting with a professional insolvency practitioner (IP) before deciding if it’s the right course of action for you. The advisors we connect you with will walk you through the steps of filing for bankruptcy. They will also provide you with the best bankruptcy advice on matters you’re sure to be interested in, such as determining whether other debt management options might be for you, including a bankruptcy loan, debt consolidation, or individual voluntary agreement.

Bankruptcy UK – How Does Bankruptcy Work?

Bankruptcy is a legal process for individuals who owe creditors and are unable to pay off their debts. It can allow you to make a fresh start from creditors, and your assets are liquidated to pay off what you owe. It is used as a last resort in most cases, as other options do not affect your assets and credit as severely. Alternative options include:

  • Bankruptcy loans
  • Debt consolidation
  • Debt relief orders
  • Debt management
  • Individual voluntary agreements

You can become bankrupt if the High Court authorises a bankruptcy order after being presented with a bankruptcy petition. A petition can be presented to the Court by one or more of your creditors, the debtor (that’s you), or the supervisor of an individual voluntary agreement (IVA).

If you find that you need to file for bankruptcy, there is a cost associated with it. Once you declare bankruptcy (or an insolvency practitioner files your bankruptcy), your assets are liquidated, and the proceeds from this are used to pay off as much debt as possible. The remaining debt is eradicated, and your creditors can no longer charge you any fees, nor are they allowed to contact you.

Declare Bankruptcy – Is Bankruptcy for You?

Unfortunately, bankruptcy has earned itself a negative stigma. Many people hang back and hesitate to file for bankruptcy just because they don’t want to face what others might think of them or what it might mean for their financial life as they know it. Some even look into taking out bankruptcy loans to try to cover the costs of their debt.

In stark contrast, bankruptcy isn’t something bad. It’s a process that’s designed to help overindebted people get a new financial start and some breathing room along the way. The process is dramatic, yes, but the outcome can be just as dramatic, in a good way.

Filing a voluntary bankruptcy petition might be the right course of action for you if you find that you’re struggling to make monthly payments to your creditors. You’re not just struggling, payments seem impossible, and your months are riddled with “Am I going to afford this?” thoughts and feelings.

One of the primary benefits of being bankrupt is that you’re faced with a lot less pressure, and your debts will be waived.  If you’re unsure if bankruptcy is the route you should take, take some time to speak to our consultants, who can help you compare bankruptcy with some of the other debt management options we can connect you with.

Do I Apply for My Own Bankruptcy?

In some instances, you don’t have to be the one who files your voluntary bankruptcy petition. Your creditors can apply to make you bankrupt if your finances are too tight, and you owe more than £5,000. Insolvency practitioners can also force you into bankruptcy if you break the terms of an individual voluntary arrangement (IVA). We encourage you to reach out for advice from the industry experts if you’re facing a situation like this. This can be a confusing and difficult time for many people, but you don’t have to face it all alone.

Whatever way you arrive at bankruptcy, it’s important that you go through the steps of liquidating your assets and protecting them. There is a set protocol to follow to ensure that your creditors are paid, and your debts are discharged. The hassle of calling each company you owe money to is eliminated when you have the assistance of an insolvency practitioner on your side, putting your interests first. Just having someone handle the process for you will eliminate a lot of the stress involved in the process.

After your debts have been discharged, bankruptcy reduces the pressure on you. Never again will your dinner be interrupted by creditors hassling you for their next instalment. Nevertheless, insolvency comes at a price, with restrictions that can last for years, so this is not something to go into lightly. Always consider all of your options and then seek out the best bankruptcy advice before taking the plunge. At, we can ensure that you’re linked up with the best advisors in the business so that you can make an informed and educated decision about your financial future.

Bankruptcy Example

Bankruptcy can be a tricky solution. Let’s take a look at one example of bankruptcy.

Case study of Helen & Kevin’s bankruptcy filing.

Total Combined Debt Fee to Apply Granted Discharged from Debt
£115,000 £680 1 April 2020 2 April 2021

The above table shows us how things worked out for Helen and Kevin (for the sake of example). Helen and Kevin have found themselves in combined debt of £115,000 (including shortfalls on secured debt of £67,000) that was seemingly affordable.

After consulting with our panel of experts, they were able to file for bankruptcy that covered all of their debt, including loans, credit cards, and more. They had to move to a smaller property (rented) to sell their property and obtained their discharge from debt 12 months later. Now they live frugally and focus on saving so that they can eventually afford to buy a new home again.

Declaring Bankruptcy UK – What Is Covered with Bankruptcy?

Understanding which of your debts are covered by bankruptcy is an important step before deciding to apply for a voluntary bankruptcy petition. Here’s a brief look at what your debts your bankruptcy will waive.

Covered Not Covered
Credit cards Mortgage
Phone bills Social fund loans
Medical bills Student loans
Unsecured personal loans Court fines
Store cards Confiscation orders
Personal lines of credit Maintenance/child support
Bank overdrafts Debts from death/injury

Filling for Bankruptcy – Costs Of Bankruptcy

The monetary cost for an application for bankruptcy is £680.00. This fee includes the administration fee, court fee, and statement of affairs fee.

Liquidating assets, associated court costs, and the toll on you and your family are all factors to consider prior to making your decision. Even if you deem them necessities, your assets can be seized, your employment can be affected, and you can lose your home. Our associated insolvency practitioners work hard to protect the things that matter to you, but it’s not always possible to keep possession of everything you think you need.

At, we will put you in touch with bankruptcy experts who can advise you further.

Bankruptcy and Insolvency Pros and Cons

As is the case with all debt management solutions, there are benefits and disadvantages to being bankrupt. Below are the pros and cons to consider.

Choosing bankruptcy could result in the cancellation of all or some of your debts You may be forced to sell your car or house to pay your creditors
Your insolvency will be formally acknowledged once you obtain a bankruptcy order, thus protecting you from legal action from creditors Bankrupt individuals may have job implications as some employers usually do not continue to employ bankrupt individuals
Bankruptcy eliminates any additional costs or penalties that your creditors may charge you The bankruptcy will remain on your credit history for up to six years and negatively affecting your credit rating
The bankruptcy will prevent any contact from creditors after the declaration On the public register, you will be publicly listed as bankrupt

Do You Qualify for Bankruptcy?

When considering bankruptcy, you should consider more than just eligibility.

Take the time to learn about all your options so that you can decide which option is best for you. Here at Reform Debt Solutions, we offer a variety of solutions that may help you avoid bankruptcy altogether. Of course, if this is the way you need to go, we will ensure that you have access to the best professionals in the industry to assist you.

You can check your eligibility in minutes, with no obligation or pressure, by filling out our simple form.  As soon as we have reviewed your request, a consultant will get in touch with you.


How Does Bankruptcy Work?

If you have decided to declare bankruptcy, it is best to seek professional advice and assistance from experts who understand the process and handle the finer intricacies.

An appointment for a hearing is made by the bankruptcy court that handles your area’s cases. Once that is done,  the insolvency practitioner will prepare the necessary paperwork for the hearing. The bankruptcy clerk will need your properly filled out application forms and the applicable fee when you arrive for your appointment. Afterwards, a hearing will be held. You need to be coached on what to expect in this hearing before the process begins.

The Court will review your financial situation and decide on whether to grant bankruptcy at the hearing. In most cases, petitions are granted if you are technically insolvent, have properly completed the application form, and have paid the appropriate fee. The Court might ask if you have taken professional advice before filing for bankruptcy, which if you have applied through the process through Reform Debt Solutions, you have.

The Official Receiver’s office receives notice of a bankruptcy order once the Court issues it. In order to hold an initial telephone appointment with this office, you may be asked to remain in Court for a short time. In either case, they may arrange to have the individual schedule a follow-up call to discuss their financial situation, or they may also schedule that the individual comes in for an in-person meeting to discuss their situation. All of this will be explained to you before arriving at the Court for the initial hearing.

Prior to filing, the Official Receiver gathers information regarding assets, income, expenditure, and conduct. The purpose is to establish whether an individual can contribute towards the bankruptcy costs and the debts via their assets and income.

The designated possessions are liquidated at this point, and the proceeds are dispersed to the creditors you owe money to. This can include things like your house, car, leisure equipment, jewellery, etc. Only the essentials will be kept, such as household items, clothing, furniture, along with supplies required for your jobs such as your car or truck and tools.

There is a silver lining in what may seem like a bleak situation. Bankruptcy will relieve you of the stress of coping with creditors, and most types of financial litigation against you will cease. In most cases, after a year, you will be discharged from your debts, making you free from the burden of debt. In some cases, you may be required to pay a monthly amount to satisfy the debt for a period of up to three years.

Applying for bankruptcy and insolvency through Reform Debt Solutions can alleviate some of the pressure and stress associated with the process. You will be put in touch with the right experts to help you with paperwork and navigate the regulations that need to be followed. The process is far less overwhelming when you have an expert with debt management know-how on your side.

How Can Bankruptcy Happen?

  • You might be wondering what the bankruptcy process is. You can be made bankrupt in three ways. The first way is to voluntarily liquidate your assets by filing for bankruptcy yourself. This is usually done if you are unable to pay what you owe. Self-declaration is possible through the bankruptcy and insolvency register. Through the Government’s website, you can apply online in England and Wales. In Northern Ireland, bankruptcy proceedings are handled through the courts, while in Scotland, they are handled by the AIB (Accountant in Bankruptcy). If you are considering bankruptcy, it is wise to first contact an independent debt adviser. At Reform Debt Solutions, we can put you in touch with independent debt advisors who will provide advice and guidance on the process and what you need to do to get started.
  • Another way that you can become bankrupt is through the actions of your creditors. In this instance, the company or companies you owe money to can apply to make you bankrupt if you owe £5,000 or more and are consistently failing to make your monthly payments. They can do this without your permission, and the process will be seriously considered.
  • Lastly, you can become bankrupt even if you’re in an IVA.  If you are in an Individual Voluntary Arrangement, and you break the terms of this agreement, an insolvency practitioner can apply to declare you bankrupt. The terms of the individual voluntary arrangement are very strict, and there’s no leeway for defaulting.

Is Anyone Going to See I’m Bankrupt?

Many individuals and organisations can be informed of your bankruptcy, including banks, credit unions, and lenders, along with your utility providers (electric, gas, and water). If you rent a property or are paying off a mortgaged home, your landlord or mortgage company will be informed. And of course, your local authority, Citizen’s Advice Bureau, and organisations that you’re a member of may also be informed of your bankruptcy.

There’s no real fear of your family and friends learning of your bankruptcy publicly, though.

How Will Bankruptcy Affect My Life?

There are several ways in which bankruptcy can and will affect your life:

The loss of valuable possessions can be devastating. The only items you can keep are necessities (such as your car if you can’t do your job without it). At the same time, these items may need to be exchanged for cheaper versions if the courts deem them to be very expensive or excessive. Even though it’s upsetting to lose your belongings, keep in mind what you’re working towards a debt-free life – it will all be worth it in the end.

Public knowledge of your bankruptcy will be available but not apparent unless someone is seeking it out. Newspaper bankruptcy notices are a thing of the past. That said, the Insolvency Register will publish your filing. Are you concerned about your neighbours’ reactions? Don’t worry too much about that. It is unlikely that local or national media will cover your bankruptcy unless it is of great public concern or you are a high-profile figure.

You may lose access to your bank accounts, which can cause issues. As a result, day-to-day life can become difficult since a bank account is necessary to receive your salary and pay your bills. That said, it may still be possible for you to open a basic bank account usually designed for people with bad credit. You can store and pay money in these accounts without having access to overdrafts or any banking services that allow for access to finance (such as a credit card).

This can be a stressful experience. Filing a voluntary bankruptcy petition and telling friends can be an emotionally draining process. However, bankruptcy can be a positive experience for many, as it allows them to turn over a new leaf.

Will My Job Be Safe During Bankruptcy?

Bankruptcy may affect some jobs. If a person’s membership in a professional body is terminated, they may no longer be able to perform the duties of their current role. You should refer to the terms of your employment contract, ask your employer for more information, and consult any relevant regulatory or professional bodies that you are affiliated with.

How Will My Bankruptcy Affect My Spouse and Others?

Someone you are financially connected to could be negatively affected by your declaration of bankruptcy if you share the debt. Shared bank accounts or a mortgage are examples of financial connections. In cases where you do not have any financial ties to someone, their credit information should not be affected, even if you are living together.

The property or possessions that you and your partner jointly own could be sold to help repay your debts. Almost always, your share will usually be offered to them for sale, or they will have the opportunity to establish a value for the item. You will divide the money with your partner and creditors if you sell the item.

In the Event of Bankruptcy, Will Everything I Own Be Lost?

The possession of some assets becomes entrusted to the insolvency practitioner when you declare yourself bankrupt. These assets include:

  • Interest in property, whether owned jointly with a spouse or partner or balances in a savings or credit union.
  • Bonds, shares, savings policies, and endowments, if the investment matures during bankruptcy.
  • Motor vehicles or expensive jewellery (lower-cost versions may replace these); or lump-sum payments from an occupational or private pension.

The Court may also order you to pay a portion of your wages if an income payment order is issued. An income payment order is based on the contribution of all surplus income (such as tips, bonuses and so on). This will normally run for three years following the bankruptcy date.

Consequently, your budget for living expenses will be somewhat restricted, although you should receive sufficient funds to cover necessary and reasonable living expenses.

The insolvency practitioner is authorised to sell assets, when necessary, without your consent. You are permitted to keep furniture, basic household items, bedding, and clothing. You may also keep items needed for employment, such as books, tools, and a vehicle.

The insolvency practitioner must be informed if you acquire assets during the bankruptcy period, and the assets could be reclaimed for paying off creditors. An eligible asset may include a significant bingo, football pool, or National Lottery windfall, an inheritance of cash, property, investments, or valuable assets, and money received after the bankruptcy date but before the bankruptcy is discharged.

Is a Student Loan Dischargeable in Bankruptcy?

In most cases, the short answer is no. The loan might not be written off in bankruptcy if it was taken out after September 1, 2004. Paying from salary will continue even if the individual goes bankrupt before paying off the student loan. A person who earns less than the income threshold for student loans will not have to make payments until his or her salary reaches the designated level. For student loans taken out prior to this date, please consult with a professional insolvency practitioner by contacting Reform Debt Solutions – we’ll put you in touch with one.

What Are the Repercussions of Bankruptcy on My Credit File?

In most cases, a bankruptcy remains on your credit report for six years. This can make things quite challenging for that time. Make it your duty to get your name cleared as soon as possible. It’s important that after six years, you make sure it has been cleared from your profile.

Bankruptcy makes it difficult to borrow money because lenders look at your credit history. You also need to disclose your bankruptcy to lenders when you request a loan of over £500.

You may be charged a higher interest rate if you do find someone who will lend you money as they will view you as a high-risk client. Lenders can ask whether you have ever been bankrupt, even if your bankruptcy has been cleared from your record (especially common when applying for a mortgage).

A bankruptcy can also affect your employment. Before hiring you, employers may ask to see your credit report. Furthermore, before allowing you to rent a property, landlords may ask to see your credit report.

Do yourself a favour and check your credit report at least annually. You can see what’s on your credit profile and ensure there are no errors or discrepancies. Having this information sets you on the right path to improving your financial situation.

What Are the Steps for Rebuilding My Credit File After Bankruptcy?

Here’s some good news for you: bankruptcy doesn’t mean ruin in terms of finances.

You can do several things in the short term to build a good credit profile after your bankruptcy has been removed from your credit profile.

  • First and foremost, make sure your credit information is accurate by ordering a copy of your statutory credit report. You can explain why you became indebted in your report (e.g., illness, divorce, or redundancy). You should also register to vote at the address you currently occupy to ensure your credit report has your latest information.
  • Another way is to prove just how creditworthy you are. To show lenders you can borrow responsibly, it’s important to show them that you can manage your money in the long run. Using and repaying credit will allow you to do this. Before you do that, you should be certain you can afford to do so and make the repayments.
  • If you have a bad credit history, consider securing credit that is tailored to you. Typically, low borrowing limits and high interest rates are associated with this.  If you use this type of credit for small purchases (like groceries) and pay them back on time, you may improve your credit score.
  • Apply sporadically for credit and accounts and only if you have to. Your credit report will be affected by every credit application, so you are urged to apply no more than once per three months. Before applying for credit, check your eligibility. Taking steps to decrease the chances of rejection and having to submit multiple applications will improve your chances of getting accepted. Checking your credit report enables you to determine your credit card and personal loan eligibility.

As soon as you’ve gotten back on track, keep a close eye on your finances to make sure you stay there. You can do this by monitoring your credit closely and improve your credit profile by ensuring you’re always in control of your finances.

In What Ways Can Bankruptcy Be Managed Instead of Going Bankrupt?

Alternatives should be considered when bankruptcy is not the suitable choice or has deterrent effects:

  • One way you can try to avoid going bankrupt is by negotiating an informal agreement with creditors. This involves writing to each of them to explain your financial status, outlining the circumstances leading to it (i.e., divorce or illness), and coming to a mutually agreeable solution regarding an affordable repayment plan for the debt, a Debt Management Plan.
  • Another option is an IVA or Individual Voluntary Arrangement. Insolvency practitioners and your creditors agree to terms through proposals under this formal and legally binding contract.
  • Lastly, negotiating a monthly payment amount with creditors through a debt management service is a viable option. To repay the debt, you must provide the company with the requested information and pay them a monthly fee. According to the arrangement, each payment will be divided among the creditors. It will continue until the debts have been repaid, plus any interest or other associated charges.

When applying for bankruptcy through Reform Debt Solutions, you will be connected with our chosen insolvency practitioner, who will help you manage your financial situation and advise you on debt management loans, debt relief orders, debt consolidation, and IVAs.

Do I Need Advice Regarding Bankruptcy?

If you are considering (or involuntarily facing) bankruptcy, you should seek professional advice to explore all of your options. When applying for bankruptcy, the Court will ask you if you have received advice to ensure you’re making the right decision for you.