If you’re bankrupt, it means the law has declared that you’re unable to pay your debts.
You can be made bankrupt against your will, but you can also ask to be made bankrupt as a way to clear your debts. This is called filing your own bankruptcy petition. Someone who works for the Insolvency Service, called an adjudicator, will make the final decision.
If you’re declared bankrupt, your assets will be taken away to pay off as many of your debts as possible (your assets are things you own, like your home).
You’ll also have to follow certain restrictions. For example, you won’t be able to borrow more than £500 without telling the lender you’re bankrupt. And you won’t be able to manage or promote a company without special permission.
Normally, you’ll only be bankrupt for a year. After this time, most of your remaining debts will be cancelled, meaning you can start afresh.
If you’re thinking about applying for bankruptcy, make sure you check out other ways you could deal with your debts first. For example, an Individual Voluntary Arrangement (IVA) is an alternative that could allow you to keep your assets.