Finance glossary
Bankruptcy
In simple terms
Bankruptcy is a formal way of dealing with debts you cannot pay. Most of your debts are written off, but you may lose valuable assets and there are serious restrictions while it lasts.
On this page
What does bankruptcy mean?
Bankruptcy is a formal insolvency process for people who cannot pay their debts. You can apply for your own bankruptcy online, or in some cases a creditor can apply to make you bankrupt.
Once you are bankrupt, most of your debts are dealt with, and after a set period (usually 12 months) you are normally “discharged” and freed from those debts.
How bankruptcy works
An official receiver takes control of your bankruptcy. Assets that can be sold to pay creditors — potentially including your share of a home — may be used, and if you have spare income you may have to make payments for up to three years.
There is a fee to apply for your own bankruptcy. It is recorded on a public register and on your credit file for six years.
How could this affect me?
Bankruptcy can free you from unmanageable debt, but it can mean losing assets and comes with restrictions — for example on borrowing and acting as a company director. It can also affect some jobs and rented tenancies.
Because the consequences are significant and other solutions (such as a DRO or IVA) may fit better, always get free advice before applying.
Things to watch out for
- You could lose valuable assets, potentially including your home.
- It is recorded publicly and on your credit file for six years.
- Other solutions may suit you better — get free advice before applying.
Know your rights
- You can apply for your own bankruptcy through GOV.UK, and are usually discharged after 12 months.
- Certain essential household items and tools of your trade are generally protected from being taken.
- Free, impartial advice is available from StepChange, Citizens Advice and National Debtline before you decide.
General information, not personal advice
Consumer Credit is an independent information service. We do not provide regulated financial advice or sell financial products. For advice on your own situation, speak to an appropriately authorised firm or a free service such as MoneyHelper. About Consumer Credit.
Sources
We checked this page against these official and authoritative sources.
- GOV.UK, Options for paying off your debts — bankruptcy (opens in a new tab). Accessed 22 Aug 2026.
- MoneyHelper, How to declare yourself bankrupt (opens in a new tab). Accessed 22 Aug 2026.