Bankruptcy is usually as a last resort and is not without it's cost. If you wish to make yourself bankrupt, you will need to pay the court a fee of £475 (This can be reduced in some circumstances to £325). So you will need this money at least in order to go bankrupt.

Alternatively, a creditor that you owe more than £750 to can try to make you bankrupt but this is not as easy as you may think. Firstly, the creditor is likely to have to pay fees in excess of £1,000 to do this and then they have to convince the court that you are in fact insolvent. If all of this is done then you can be made bankrupt. A creditor is very unlikely to do this unless you have assets that will make it worthwhile for them. If you do not own anything of any real value, there is no benefit in the creditor doing this. For homeowners there are other options e.g. an IVA that may be an alternative and we will discuss this further in the next section.

If you make yourself bankrupt or one of your creditors makes you bankrupt, then an estate is automatically created from the court action. Everything that you owned will no longer belong to you but you can still retain furniture, tools for your business, bedding, clothing etc. You will still be allowed to keep all necessity items and you can also still retain any motor vehicle that has a value of £1,500 or less if you need it for personal use or travelling to work and it is really a necessity item.

The estate in Bankruptcy is immediately under the control of the Official Receiver who is a Civil Servant and officer of the court and is employed by the Insolvency Service that is an agency of the Department of Trade & Industry. As soon as you are made bankrupt you will contacted by this person.

The advantages of being made bankrupt are that you can now become a discharged bankrupt in 3 years and it allows you to then make a fresh start. The disadvantages are that you will lose your home if you own one and any of your other assets. Details of your bankruptcy will also be published in a newspaper. Therefore, this is a very public way of showing that you are insolvent.