How Bankruptcy Works in the UK in 2026

The £680 is what stops most people. Not the shame, not the paperwork. Six hundred and eighty pounds, when you are already behind on everything.

Bankruptcy is a legal way to have most of your debts written off when you cannot pay them. This guide uses GOV.UK, National Debtline, StepChange and Citizens Advice, checked October 2026. It covers England and Wales. Scotland uses a different process called sequestration, and Northern Ireland has its own rules, so get local advice there.

Bankruptcy is the rarest of the three formal routes. It made up 6% of individual insolvencies in England and Wales over the 12 months to September 2026, with 671 bankruptcies in September itself, according to the Insolvency Service. See the full set in our debt statistics.

Where the £680 goes

The fee is split in two. £130 is the application fee and £550 is a deposit that goes towards the costs of handling your case. You pay online, and you can pay in instalments of at least £5. Instalments have a limit: the whole £680 must be in before you can send the application, so nothing is submitted until the last pound lands.

StepChange suggests using money you would otherwise send to creditors, asking family or friends, or looking for grants through Turn2us. Our own plain view: if you have to borrow the £680 on a card or a payday loan, stop. That defeats the point.

What happens after you apply

A self-application is not a court case. An adjudicator at the Insolvency Service looks at it and contacts you within 28 days. If the order is made, the official receiver takes over. That is a government officer, not a debt collector, and their job is to look at your finances and deal with your assets.

The adjudicator also checks whether other money could pay the debts instead, such as a pension or savings. GOV.UK says that if you can cover your debts that way, the application might be refused. If it is accepted, your name goes on the Land Charges register, which lenders can search when you apply for a mortgage.

Expect an interview, sometimes by phone. They ask about your income, outgoings, assets and pensions. They can sell assets, work out whether you should pay anything from your income, and apply for a bankruptcy restrictions order, which adds extra limits for longer.

A worked example: £18,000 of debt and £140 spare a month

This is our own illustration, not a real case. Jo owes £18,000 across two credit cards, a loan and a catalogue account. Jo cannot afford the minimums and has no assets worth selling. After rent, food, bills and travel, about £140 a month is left over.

National Debtline says surplus income above £20 a month is usually payable. That figure is the working rule National Debtline gives, and the official receiver looks at the real numbers case by case. So for this example, take £120 a month as the likely payment.

So the debts do not vanish for free. In this example Jo pays £680 up front, then £4,320 over three years, a total of £5,000, and the remaining balance is written off. That is a proper comparison to put next to a debt management plan. Our guide to DRO vs IVA covers the other formal routes.

If Jo’s income is only benefits, the picture changes. There is no income payments agreement when your only income is state benefits, and you pay nothing from income if you have no spare money.

Income payments: the three-year tail

Most people think bankruptcy ends after a year. The debts may be discharged then, but money from your income can run for up to 3 years. Citizens Advice explains that an income payments agreement is voluntary, and lasts about 3 years, and is based on what is left after essentials and reasonable living costs. If you cannot agree, the court can make an income payments order, which can take payments straight from your salary.

Payments can change. A pay rise, an inheritance or a baby can move the amount up or down, and you could be asked for a one-off lump sum. That is the part people miss, so check it in the interview.

Things you cannot do while bankrupt

GOV.UK lists four limits. You cannot borrow more than £500 without telling the lender you are bankrupt. You cannot act as a company director, or create, manage or promote a limited company, without the court’s permission. And you cannot run a business without giving the name you were made bankrupt under, as well as any business name you used. You might be prosecuted if you break these. They last until the bankruptcy ends.

They can last longer. If the official receiver believes you acted carelessly or dishonestly, they can ask you to agree to a bankruptcy restrictions undertaking, and if you refuse they ask the court for a bankruptcy restrictions order. National Debtline says those run for 2 to 15 years.

Your bank account

GOV.UK says the bank will usually freeze your accounts. If you need money urgently, for example for food, your trustee can ask the bank to release it, and the bank decides. Money in a joint account that belongs to someone else is given to them. Your bank can also use money in your accounts to pay other debts you owe it, which is called set-off. We explain how that works in can my bank take money from my account.

Debts bankruptcy does not wipe out

This is the section people read last and should read first. GOV.UK says you must keep paying:

What happens if you miss an income payment

If you stop paying an agreement, GOV.UK says the trustee can ask your employer to take the money straight from your wages, make you bankrupt for longer by suspending your discharge, or take legal action. You must tell the trustee straight away if your income or spending changes or you receive a lump sum. An agent such as Advantis Credit Ltd may collect the payments, and you must reply if it contacts you.

After the 12 months: what stays on record

Credit reference agencies are not told directly when your bankruptcy ends. They get it from public records, so GOV.UK suggests you get a copy of your credit report and ask the agency to update it if needed. You can email the Insolvency Service for a free letter confirming your bankruptcy has ended. If you have an income payments agreement or order, you must keep paying until it finishes, even after discharge.

When a creditor forces it

You do not have to apply yourself. A creditor can petition for your bankruptcy if you owe £5,000 or more, 21 days after a statutory demand is served. A statutory demand is a formal letter that says pay up or face a bankruptcy petition. If one arrives, do not leave it in a drawer. Get advice that day, because the clock is short. Breathing Space may also give you time to sort out a plan.

Before you decide

Bankruptcy is not the only way out, and it is not always the best one. If you have few assets and a low income, a debt relief order may cost less. If you have a regular income and a house, an IVA may be worth a look. The Bankruptcy and DRO Checker gives a quick steer, and a free adviser can then confirm it. Start from our UK debt help hub if you want the full list.

Questions people ask at 2am

More UK help: how to pay off debt.

Keep reading

• Debt Management Plan UK: How It Works and What It Costs
• DRO vs IVA UK: Which One Fits You? (2026)
• Breathing Space UK: 60 Days of Debt Protection
• Statute Barred Debt UK: How the 6-Year Clock Works (and What Resets It)
• How Much Does Bankruptcy Cost in the UK? Fee Help
• Bankruptcy vs DRO: Which Is Right for You in 2026?
• Debt Statistics 2026: UK and US Household Debt Figures

AI Debt Payoff Planner

Get your exact debt-free date free.