If you are suffering financial difficulties one option available you is bankruptcy. You must apply online and your application will be considered by an adjudicator within the Insolvency Service (a government department). If the adjudicator agrees then a bankruptcy order will be made and the Official Receiver (a government official) will in the first instance be appointed as your Trustee, in certain circumstances an insolvency practitioner may subsequently be appointed Trustee. All of your assets vest in your Trustee who will realise them for the benefit of your creditors.

Whilst bankrupt you will be subject to certain restrictions, broadly you are unable to borrow more than £500 or act as a company director. Other restrictions may apply in certain professions. You will usually be discharged from bankruptcy after one year, following which these restrictions end.

A creditor can also apply to make you bankrupt; however the application process is different. If you have been made bankrupt by a creditor you may be able to have the bankruptcy cancelled, or annulled, if you are able to pay your debts. Contact us for further information.

As an alternative to bankruptcy you may wish to consider whether an Individual Voluntary Arrangement (or an IVA) would be suitable. You will need to instruct an insolvency practitioner to draft your IVA proposal. An IVA is essentially a contract between you and your creditors which typically lasts for around 5 years. The terms of your IVA will usually be that you make monthly contributions of any agreed amount or that you realise certain assets (or a combination of both) and in return your creditors agree to ‘write off’ a proportion of the debt due.

Further options are available to individuals such as debt management plans or debt relief orders. Before deciding on a course of action it is important that you seek appropriate advice from your local Citizens Advice Bureau or similar organisation.