Debt Solutions - Bankruptcy

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Bankruptcy is a court order you can apply for if you have unmanageable debts that you are unable to repay. As part of the process, your assets will be distributed and sold amongst your creditors.

Usually, your bankruptcy is discharged at the end of 12 months, meaning anything you still owe is written off. However, in some circumstances, you may be required to keep up payments for three years via an income payment order.

Bankruptcy has no minimum requirement, however, if a creditor was to file for bankruptcy, then the debtor would need a minimum of £5000 debt with that individual creditor. The process itself costs £680, but you can pay this to the Insolvency Service in affordable instalments.

There are lots of options out there for people in debt, but the timeline for how a person goes about declaring bankruptcy is laid out in the steps below:

Step 1: make sure bankruptcy is the right option for you
Step 2: complete the bankruptcy form and pay the fee
Step 3: withdraw some money for your living costs
Step 4: submit the application
Step 5: wait for the adjudicator’s decision
Step 6: bankruptcy order is made
Step 7: co-operate with the official receiver
Step 8: open a bank account
Step 9: discharge from bankruptcy

• Individual Voluntary Agreement (IVA) – an agreement with your creditors to pay all or part of your debts. This is where a person agrees to make regular payments to an Insolvency Practitioner, who then divides the money between the person’s creditors. This option gives people more control over their assets than bankruptcy, Individual Voluntary Agreement (IVA) information. <<more info>>

• Debt Management Plan (DMP) – The difference between a DMP and an IVA is that with a DMP, all outstanding debt is repaid. It’s a much more informal solution and therefore, there is no guarantee that interest and charges will be frozen by creditors. It’s also true that creditors can still pursue legal action, whereas, with a legally binding IVA, no changes can be made to an approved agreement. Debt Management Plan (DMP) information. <<more info>>

• Bankruptcy – Bankruptcy presents the opportunity to clear debts and go for a ‘fresh start’ but there are many consequences which must be considered before declaring bankruptcy. Citizen’s Advice covers this in more detail, including timelines, checklists, costs, and implications at, Bankruptcy information. <<more info>>

• Debt Relief Order (DRO) – This presents people with a way of dealing with their debts if they can’t afford to pay them. It is usually granted for 12 months and means a person doesn’t have to pay certain types of debts during that period of time. AN authorised debt advisor, who acts as the intermediary is the only route available for people looking to obtain a DRO. Debt Relief Order (DRO) information. <<more info>>

• Scottish Protected Trust Deed (TD) – A Protected Trust Deed is only available to residents of Scotland and presents an opportunity for people to remain in possession of their home (in most cases). This formal but voluntary agreement is overseen by the Accountant in Bankruptcy, Scottish Protected Trust Deed (TD) information. <<more info>>

• Scottish Debt Arrangement Scheme (DAS) – This scheme was set up by the Scottish Government to allow people an opportunity to pay back their debts without the threat of court action. The DAS presents people with a manageable way of paying back their debts and is eligible for application from people with any amount of debt. Scottish Debt Arrangement Scheme (DAS) information about applying for a DAS. <<more info>>