Bankruptcy is the formal insolvency procedure for individuals who cannot pay their debts. It does not apply to limited companies: a company that cannot pay what it owes goes into liquidation, administration or another corporate procedure instead, not bankruptcy.
Bankruptcy can still land on a director personally, most often through a personal guarantee or debts run up in their own name rather than the company’s. If it is the company, not you, that cannot pay, see our guide to what happens when a limited company goes bankrupt. This page covers personal bankruptcy in England and Wales; Scotland and Northern Ireland run separate procedures.
What is bankruptcy?
Bankruptcy is the legal process for dealing with debts an individual cannot pay. There are two main routes in: a creditor owed at least £5,000 can petition the court, or the individual can apply for their own bankruptcy online. The supervisor of a failed IVA, or a creditor bound by it, can also petition. Once an order is made, the Official Receiver normally becomes the trustee in bankruptcy straight away, and an insolvency practitioner may later take over as trustee. Certain assets are realised for creditors, and surplus income can be called on too. Most people are discharged after 12 months, though the trustee’s work on the assets can continue well past that date.
Can company liquidation make you personally bankrupt?
Not on its own. A limited company is a separate legal person, so its debts do not become the directors’ personal debts just because the company is insolvent or goes into liquidation.
What does travel with you personally is anything you signed for in your own name: a personal guarantee on company borrowing, an overdrawn director’s loan account the liquidator is pursuing, or debts that were already yours before the company’s troubles started. In a liquidation, the court can also order a director to contribute personally, for example for wrongful trading or misfeasance. If one of those cannot be paid, bankruptcy becomes a live question for you, separately from whatever happens to the company.
How can a creditor make you bankrupt?
A creditor can present a bankruptcy petition once you owe them at least £5,000, and several creditors can combine smaller debts to reach that figure between them. Before doing so, they will usually need to show that you cannot pay – most often by serving a statutory demand first. Once a petition is presented and served on you, it is for the court to decide whether the legal requirements for a bankruptcy order have been met. A bankruptcy petition is not routine debt collection: the procedure and the consequences are both more serious.
As at 18 August 2026, presenting a creditor’s bankruptcy petition costs £1,500 for the petition deposit and £352 for the court fee – £1,852 before any solicitor’s or process server’s costs. These fees change, so check the current figures on GOV.UK before budgeting for a petition.
What is a statutory demand?
A statutory demand is a formal written demand for payment, and it has no minimum debt of its own. The £5,000 threshold applies to the bankruptcy petition that might follow, not to the demand itself. It has to be in the prescribed form and served properly – usually by a process server. If a petition follows, a certificate of service, verified by a statement of truth, is filed with it.
You have 21 days from service to respond. Your options are:
- pay the debt
- agree a settlement with the creditor
- dispute the debt, if you have proper grounds to
- apply to the court to have the demand set aside
An application to set aside runs on its own, shorter clock: it must be made within 18 days of service, not the 21 days you have to deal with the demand itself. Miss both deadlines and the creditor can move on to a bankruptcy petition, provided the other requirements are met.
How do you apply for your own bankruptcy?
If you cannot pay your debts, you apply for your own bankruptcy online through the Insolvency Service. There is no longer a debtor’s petition to the court in England and Wales.
You will need to set out your debts, income, expenditure, property, savings, pensions and other assets. An adjudicator at the Insolvency Service reviews the application and normally decides within 28 days. The fee is £680. You can pay it in one go or in instalments, but it must be paid in full before you submit the application.
Applying for bankruptcy is not a decision to make lightly. Depending on your income, assets and circumstances, another debt solution might serve you better – talk to us before you apply, not after the fee is paid.
What happens after a bankruptcy order?
The Official Receiver handles the bankruptcy at first, and you have a duty to cooperate – providing information about your assets, bank accounts, income, debts, pensions, business interests and any transactions before the bankruptcy started. You must attend an interview with the Official Receiver if they require one.
The Official Receiver, as trustee, then decides whether to seek an insolvency practitioner to take over as trustee. Since the Insolvency (England and Wales) Rules 2016, creditors can make that appointment through a creditors’ decision procedure – correspondence or electronic voting, for instance – rather than a meeting convened as a matter of course. Creditors can still insist on a physical meeting, and the bar for that is lower than most people expect: one must be held if 10 per cent in value of creditors, 10 per cent in number, or simply 10 creditors ask for one in writing, no later than five business days after the notice of the decision procedure is delivered. The Official Receiver can also ask the Secretary of State to make the appointment, at any time while they are trustee.
Whoever holds the role, the trustee’s job is the same: identify what belongs to the bankruptcy estate, investigate transactions from before the bankruptcy, and realise assets for creditors where there is something to realise.
What happens to your assets in bankruptcy?
Most of what you own when the bankruptcy starts becomes part of the estate – but that does not mean everything is taken. You can usually keep:
- household items you and your family reasonably need
- tools, equipment or a vehicle you genuinely need for your trade, business or job
Pensions run on their own rules, and what happens to yours depends on the type and the circumstances – worth checking specifically rather than assuming either way. Anything else the trustee can realise, they will, for the benefit of creditors.
Can a trustee investigate transactions made before bankruptcy?
The trustee examines transactions made before the bankruptcy. There is no single five-year look-back; each type of claim has its own period, and they are quite different:
- Transactions at an undervalue – gifts, or transfers for significantly less than the asset was worth. Five years before the petition or application.
- Preferences – putting one creditor in a better position than they would otherwise have been in. Six months before the petition or application, extended to two years where the creditor was an associate.
- The insolvency condition – for a preference, the trustee must show the individual was insolvent at the time or became insolvent as a result, whether within six months or, for an associate, two years. For a transaction at an undervalue, that condition applies only to the earlier part of the five-year period; within two years, insolvency need not be shown. Insolvency is presumed where a transaction at an undervalue was with an associate. For a preference to an associate, it is instead the desire to prefer that is presumed.
- Excessive pension contributions – a separate claim under section 342A of the Insolvency Act 1986.
- Transactions defrauding creditors – section 423, which has no fixed look-back period at all. It applies to transactions at an undervalue made for the purpose of putting assets beyond creditors’ reach or otherwise prejudicing their interests.
Which of these applies, and therefore how far back the trustee can go, depends on what was done, when, and with whom. If bankruptcy is a live prospect for you, that is a strong reason to be cautious about giving away or transferring assets now – the trustee can unwind it later.
What happens to your income during bankruptcy?
Bankruptcy does not automatically mean the trustee takes all your income. They will look at what you earn against reasonable domestic expenditure. Where there is a genuine surplus, you may be asked to enter an Income Payments Agreement (IPA); if agreement cannot be reached, the trustee can apply to the court for an Income Payments Order (IPO) instead. Either way, payments can run for up to three years – which usually means they outlast your discharge, not that discharge cancels them.
What happens to your home in bankruptcy?
Your interest in your home can become part of the bankruptcy estate. What actually happens to it depends on whether you own it alone or jointly, how much equity there is, any mortgages or other secured debts, and who else has an interest in it or lives there.
The trustee generally has three years from the start of the bankruptcy to deal with your interest in the home. If you do not tell the trustee or Official Receiver about it within three months, the three years runs from when they find out. It is a sensitive area, because other people are affected too – a spouse, civil partner, children, a former partner.
The first year matters, but not as a bar on the trustee. Under section 335A of the Insolvency Act 1986 the court weighs the creditors’ interests against the needs and resources of the bankrupt’s spouse, civil partner, former spouse or former civil partner, the needs of any children, and the other circumstances of the case apart from the bankrupt’s own needs. Where the trustee applies for an order for sale more than a year after the estate vested, the court must assume that the creditors’ interests outweigh everything else, unless the circumstances are exceptional. So the first year is the period in which those competing needs carry the most weight, not a period in which nothing can happen.
How much equity the estate actually has depends on how the home is held: joint names, tenants in common, the bankrupt’s sole name, or the sole name of the non-bankrupt spouse. There is a large body of case law on all of this, and the outcome turns on the facts.
Usually, a spouse or partner is approached first about buying out the bankrupt’s share; failing that, the trustee will look towards a voluntary sale. Where that is not possible, an application to court for repossession and sale may follow, and the court will consider the rights of occupation of anyone else living there. In exceptional circumstances – an elderly relative, a serious illness, a home adapted for disability – the court may postpone the sale, sometimes for a long period, though those circumstances have to be proven to the court, not simply asserted.
What happens if you are a company director and become bankrupt?
While you are an undischarged bankrupt, you cannot act as a company director, or take any part – direct or indirect – in promoting, forming or managing a company, without the court’s permission. That restriction runs until discharge, or longer if a Bankruptcy Restrictions Order or Undertaking is made. If you are already a director when the bankruptcy order is made, this needs sorting out immediately, not once things settle down. Bankruptcy does not stop you working or running a business outright, but it comes with its own restrictions and disclosure duties.
Can you get credit while bankrupt?
Bankruptcy makes borrowing considerably harder, but it is not an outright ban. What the law requires is disclosure: while undischarged, you must tell a lender about the bankruptcy before obtaining credit of £500 or more, alone or jointly. Trading under a different name from the one you were made bankrupt in carries its own separate disclosure duty.
How long does bankruptcy last?
Most people are discharged automatically after 12 months. Discharge lifts most of the ordinary restrictions and releases you from many of the debts included in the bankruptcy. It does not close every door, though. After discharge:
- assets that already vested in the trustee stay part of the estate
- the trustee can carry on dealing with them
- an Income Payments Agreement or Order can keep running
- some debts are not released by discharge at all
Discharge can also be suspended if you do not cooperate with the trustee – it is not a date that arrives regardless of your conduct.
What is a Bankruptcy Restrictions Order?
Most restrictions end at discharge. Where there has been misconduct, though, a Bankruptcy Restrictions Order (BRO) or Bankruptcy Restrictions Undertaking (BRU) can extend them for between 2 and 15 years. These are not imposed simply for becoming bankrupt – they are a response to conduct before or during the bankruptcy, and they can mean continuing limits on acting as a director and ongoing duties to disclose the bankruptcy when you seek credit.
Can bankruptcy be annulled?
In limited circumstances, yes. An annulment can follow on one of these bases:
- the order ought not to have been made, on grounds that existed when it was made (for example, the debt was genuinely disputed or the petition was defective)
- the bankruptcy debts and expenses have been paid or secured in full
- creditors approve an Individual Voluntary Arrangement (IVA) as a better outcome for them than the bankruptcy continuing
Annulment is a different outcome from discharge. Discharge brings the bankruptcy to its ordinary end; annulment cancels the order itself, although sales, payments and other steps already taken by the trustee or Official Receiver remain valid.
Does bankruptcy clear all your debts?
Discharge releases you from many of the debts in the bankruptcy, but not automatically all of them. Whether a particular debt survives depends on its nature and your circumstances – if there is a significant liability you are relying on bankruptcy to deal with, check it specifically rather than assuming.
What happens when the bankruptcy is finished?
The trustee’s work does not stop at your discharge. Once they have finished administering the estate, realised what there is to realise, and made any distributions, they close the case with a final report and account to creditors. There is no longer a requirement for a final physical meeting just to bring the bankruptcy to a close – that changed with the Insolvency (England and Wales) Rules 2016.
Frequently Asked Questions
No. Bankruptcy applies only to individuals. A company that cannot pay its debts goes into liquidation, administration or another corporate insolvency procedure instead.
Not on its own. The company and its directors are separate legal persons. Bankruptcy only becomes relevant to you personally if you have debts or liabilities of your own that you cannot pay.
Usually, yes. A personal guarantee is your obligation, not the company’s, so the company being liquidated does not extinguish it. Whether and how it can be enforced against you depends on the guarantee’s terms and the underlying debt.
Not necessarily, but your interest in it can become part of the bankruptcy estate. What actually happens depends on how the property is owned, how much equity there is, who else has an interest in it, and the wider circumstances – see What happens to your home in bankruptcy? above.
Generally, yes. Bankruptcy does not stop you being self-employed, though restrictions and disclosure duties apply, and trading under a different name from the one you were made bankrupt in has to be disclosed.
Not while you remain undischarged, unless the court gives you permission. The restriction normally ends at discharge, though a Bankruptcy Restrictions Order or Undertaking can extend it for between 2 and 15 years.