Glossary · UK
What is Bankruptcy Order?
A court order (or, in England and Wales, an adjudicator's decision) that formally declares an individual unable to pay their debts, placing their assets under the control of a trustee for the benefit of creditors and typically discharging most qualifying debts after 12 months.
Full Definition
A bankruptcy order is the formal legal process for an individual in England, Wales or Northern Ireland who cannot pay their debts and has no realistic prospect of doing so, whether the application is made by the debtor themselves or, less commonly for individuals with modest debts, by a creditor petitioning the court. In England and Wales, most individual applications are now made online to an adjudicator rather than through a court hearing, and once bankruptcy is declared, an Official Receiver (or an appointed insolvency practitioner acting as trustee in bankruptcy) takes control of the bankrupt person's assets, investigates their financial affairs, and administers the estate for the benefit of creditors, which can include selling non-essential possessions, a car above a modest value, or an interest in the family home. Most unsecured debts included in the bankruptcy are written off when the bankrupt is discharged, which normally happens automatically after 12 months, though this can be extended if the person fails to cooperate with the Official Receiver. Certain debts survive bankruptcy regardless of discharge, including court fines, child maintenance arrears, student loans, and debts arising from fraud, and bankruptcy carries significant consequences beyond the debts themselves: it is recorded on the public Insolvency Register, restricts the ability to act as a company director or obtain credit above a low threshold without disclosing the bankruptcy, and can affect certain professional qualifications. If the bankrupt person owns a home, the trustee's interest in it can last up to three years, after which, if unresolved, the interest can revert back to the individual in some circumstances. Worked example: a self-employed decorator owes £45,000 across unpaid supplier invoices, credit cards, and a personal loan following a period of ill health, with no realistic means of repaying it; they apply online for bankruptcy, paying the application fee, and an Official Receiver takes control of their financial affairs, selling a van used partly for leisure but allowing them to keep basic tools needed to earn a living; twelve months later they are automatically discharged from the £45,000 of qualifying unsecured debt, though a separate £2,000 court fine from an unrelated matter is not written off and remains payable in full.