Bankruptcy is often seen as the last resort by many people who face financial difficulties.  The process itself brings about many restrictions and effects your credit score. Regardless, if you are unable to benefit from a non-insolvency option with your creditors, and an IVA is not feasible, bankruptcy may be the only choice.

Broadly speaking, when you are declared bankrupt all of your assets vest in the bankruptcy estate.  This could include cash savings, your interest in any property and other valuable assets. Certain assets are however excluded from the bankruptcy estate.

There are two routes in to bankruptcy;

Creditor petition – If one or more of your creditors have exhausted other avenues to recoup funds they may opt to petition for your bankruptcy.  You will receive a copy of the petition and the Court will set a hearing date to consider the circumstances.  

Debtor application – Alternatively, you (the Debtor) can apply for your own bankruptcy.  This is an online application process and a one off fee is payable. You application is then considered by the Adjudicator.  You will be notified of the outcome. A bankruptcy application may be made by visiting 

As soon as you are declared bankrupt, the Official Receiver (a government department) will be appointed as Trustee in Bankruptcy.  The Trustee will invite you to an interview to discuss your financial affairs and the implications of the bankruptcy. On some occasions, the Official Receiver may opt to transfer the case to an independent insolvency practice, such as Keystone Recovery Limited, to act as Trustee.  This could be due to complex issues for which the Official Receiver does not have the resources to deal with, or a majority of creditors opt to appoint a specific insolvency practice to protect their position, for example.

Please note that Keystone Recovery Limited are not regulated by the FCA to provide personal financial advice.  Accordingly, whilst we can assist you in discussing the general implications of bankruptcy and the role of a Trustee, we are not permitted to formally advise you as regards your personal financial position.

FAQ’s relating to the bankruptcy process

What assets are excluded?

The most common assets to be excluded from a bankruptcy estate are your pension, cars with low value, tools of trade, clothes and furniture (of low value).

If I jointly own my home with my spouse or partner, what happens to that?

The Trustee will write to your spouse or partners advising them of their interest in the property.  Ordinarily the Trustee will first explore the possibility of selling their interest in the property (value to be agreed) to your spouse, partner, or even family or friends.  If this is not possible they will explore a voluntary sale of the property with your spouse or partner, with the sale proceeds to be split accordingly.

If nothing can be agreed to realise the Trustee’s interest amicably, they will most likely have no option but to apply for an Order for Possession and Sale of the property.

Can I still run my own business?

As an undischarged bankrupt you cannot act as a director of a company.  If you are a sole trader, it may be possible for you to continue trading your business during the bankruptcy process.  Various restrictions apply and a strict process must be followed. If it is your intention to carry on trading a business following your bankruptcy, you will need to disclose full details to the Official Receiver and request their consent to do so.

How long does a bankruptcy last?

The length of the bankruptcy process is dependent upon a number of factors, such as difficulties in realising assets, discrepancies within your financial affairs that need to be reviewed and any other general complexities.  There is no time limit for a bankruptcy and some can stay open for many years.  

Notwithstanding the above, you will not be subject to all bankruptcy restrictions after you have received your discharge.  Discharge from bankruptcy usually occurs 12 months following the date of the bankruptcy order, but this period can be extended upon the application of the Official Receiver for various reasons, such as failing to co-operate with them.

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