Although a creditor – or a group of creditors – can make you bankrupt if you owe a total of £5,000 or more that you have not agreed on a repayment plan for, it is also possible to apply for bankruptcy yourself. Doing so means making a personal application. Emphatically, bankruptcy is not a route for companies or partnerships. That being said, you could be a partner of a business or a director and apply for personal bankruptcy. Under such circumstances, it would be highly beneficial to seek professional guidance because your personal status as a bankrupt individual could affect your business dramatically.
Regardless of whether you run a business or not, bankruptcy means being able to remove the burden of debt you may have. Assuming you are considering making yourself bankrupt – rather than an insolvency practitioner doing so because you have broken the terms of an individual voluntary arrangement (IVA), for example – there are certain things you’ll need to know. Firstly, different rules apply in Scotland and Northern Ireland than in England and Wales. You cannot, for instance, declare yourself to be bankrupt in England and Wales if your normal address is in Scotland.
Secondly, you will need to pay a fee to apply for bankruptcy. The government sets the level of this fee which currently stands at £680. However, you may find that applying for a debt relief order (DRO) is a viable alternative given your set of unique financial circumstances. DROs cost £90 to apply for but they are not the same as bankruptcy orders. Again, personal insolvency advice is recommended to ensure you choose the option that is in your best interests.
These days, bankruptcy applications are filled out online on the government’s website. Note that the web service will ask you for the full £680 fee but you do not have to pay it all in one go. Instead, you can pay £5 only to begin the process so long as you commit to paying the rest of the fee in instalments. Cash payments are also allowed. To opt for a cash payment, you will need to take the money to a bank that is part of the government’s scheme and notify the cashier of what the payment is intended for. Full details of how this works are available on the gov.uk website.
When you have completed the web form with all of your details, the bankruptcy application will not be immediately approved. Instead, the application will go to someone at the Insolvency Service known as an adjudicator. A decision will then be made about whether the application has been successful. Adjudicators are allowed up to 28 days to make their decision. If approved, you will be formally notified and an official receiver will then be appointed to go through your case. If the adjudicator turns down your application, then your only option is to appeal the decision and ask for it to be reviewed. This must be done within 14 days of the decision being made, however, or it won’t be considered.