How long does bankruptcy last?

Breaking down your essential bankruptcy timeline.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

If your level of debt has become unmanageable, then you may be considering all options available. One of those options is bankruptcy. It’s a process that allows you to clear your debts and start again. However, it’s also a big financial step that has ramifications that last years into the future.

We’re here to break down how long bankruptcy lasts and what the implications are further down the road.

As a side note, if you are struggling with debt, it could help to seek expert advice from non-profit debt counselling services such as the StepChange debt charity and the Citizens Advice Bureau.

How long does bankruptcy last?

Bankruptcy is a legal status that lasts for 12 months. Once you reach the 12-month point, you will be discharged. However, you may experience the effects of your bankruptcy for a total of six years. 

Discharge happens even if no payments have been made to your creditors, some of your assets haven’t been sold yet or you’re still paying an income payment arrangement (IPA) – where any leftover monthly income is used towards paying your debts and the cost of administering your bankruptcy.

However, being discharged at the 12-month point will depend on how cooperative you’ve been with the official receiver. An official receiver works for the Insolvency Service and is attached to the court. They will act as the trustee during the bankruptcy process, unless an insolvency practitioner is appointed to take that role. If you are deemed to be uncooperative or dishonest during the bankruptcy term, the official receiver can delay your discharge.

What changes when my bankruptcy is discharged?

Once your bankruptcy is discharged, you will be free of your debts. However, there are some exceptions:

  • Debts gained by fraud
  • Money owed under family proceedings
  • Damages payable to anyone for personal injuries
  • Student loans
  • Court fines
  • Debts created after the bankruptcy order

You may also find that the value of assets you own when you are declared bankrupt will still be used to repay debts after this point. For example, the official receiver has up to three years to decide what to do with the equity in your property.

One key change that comes with your bankruptcy being discharged is that you can borrow more than £500 without having to tell the lender about your bankruptcy. Just remember, though, that if a lender conducts a credit check, it will still appear on your credit report for six years after being discharged.

Another change is that you will be eligible to become a company director again if you so wish.

What’s the timeline after my bankruptcy is discharged?

While you may be freed from bankruptcy after 12 months, that doesn’t mean that the whole process is instantly over. Here is what you can expect further down your bankruptcy timeline:

After 15 months – Three months after discharge, details of your bankruptcy are removed from the public Individual Insolvency Register (IIR). However, as mentioned above, if the official receiver finds you have acted dishonestly or irresponsibly, they may apply for a bankruptcy restriction undertaking (BRU), which means that your bankruptcy could stay in place for longer.

After two years and three months – One important thing to understand is that while you are discharged from your bankruptcy during this period, assets that you had during your bankruptcy can still be used to pay debts. One of those key assets is equity in your home. The official receiver has two years and three months from the date of your bankruptcy application to approve what should be done in regard to any equity you have in your home.

After three years – This is the deadline for your official receiver or trustee to finish dealing with any equity in your property. The process that started when your bankruptcy application was made should all be wrapped up by this point in time. Also around this time, any income payment arrangements (IPAs) will come to an end.

After six years – At the six year mark, details of your bankruptcy are removed from your credit file. However, even after the details are removed, lenders can still ask if you have ever been bankrupt. This may affect their decision on whether or not to lend you money.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

MyWalletHero, Fool and The Motley Fool are all trading names of The Motley Fool Ltd. The Motley Fool Ltd is an appointed representative of Richdale Brokers & Financial Services Ltd who are authorised and regulated by the FCA, and we are permitted in this capacity to act as a credit-broker, not a lender, for consumer credit products (our FRN is 422737). The Motley Fool Ltd does not have permissions for, and does not advise on, investment products and services, but may provide information on investment products and services.

The Motley Fool receives compensation from some advertisers who provide products and services that may be covered by our editorial team. It’s one way we make money. But know that our editorial integrity and transparency matters most and our ratings aren’t influenced by compensation. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. The Motley Fool has recommended shares in Lloyds, Tesco and Barclays.

More on Personal Finance

Note paper with question mark on orange background
Personal Finance

Should you invest your ISA in a model portfolio?

Which model ISA portfolios offer both high performance and low fees? Hargreaves Lansdown, Interactive Investor and AJ Bell go under…

Read more »

Economic Uncertainty Ahead Sign With Stormy Background
Personal Finance

Is it time to exit emerging markets investments?

Investors may well be sitting on losses from emerging markets funds. Is it worth keeping the faith for a sustained…

Read more »

Personal Finance

Share trading? Three shares with turnaround potential

Share trading has been difficult in 2022, but which companies have turnaround potential? Jo Groves takes a closer look at…

Read more »

Man using credit card and smartphone for purchasing goods online.
Personal Finance

Revealed! Why Gen Z may be the savviest generation when it comes to credit cards

New research reveals that Gen Z may be the most astute when it comes to credit cards. But why? And…

Read more »

Environmental technology concept.
Personal Finance

The 10 best-performing sectors for ISA investors

The best-performing sectors over the past year invested in real assets such as infrastructure, but is this trend set to…

Read more »

Road sign warning of a risk ahead
Personal Finance

Recession risk ‘on the rise’: is it time for investors to worry?

A major global bank has suggested the risk of a recession in the UK is 'on the rise'. So, should…

Read more »

pensive bearded business man sitting on chair looking out of the window
Personal Finance

1 in 4 cutting back on investments amid cost of living crisis

New research shows one in four investors have cut back on their investing contributions to cope with the rising cost…

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Personal Finance

The 10 most popular stocks among UK investors so far this year

As the new tax year kicks off, here's a look at some of the most popular stocks among UK investors…

Read more »