Bankruptcy is a result of individuals becoming unable to repay their outstanding debts (when liabilities exceed assets). Whilst bankruptcy only applies to individuals and sole traders, members of partnerships can also be made bankrupt.
What occurs once bankruptcy has been declared?
When someone declares bankruptcy, their assets are liquidated and distributed among their creditors, freeing them from further debt. However, it will cost the individual £680 to apply to become bankrupt. Aside from making yourself bankrupt, creditors can initiate the process if the debt exceeds £5,000. If an individual owes £50,000 or less, has savings or valuables worth less than £2,000, owns a vehicle worth less than £4,000 and has no surplus income, another option may be to apply for a Debt Relief Order.
