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What is bankruptcy

Can a creditor make me bankrupt?

Your creditors could make you bankrupt as a last resort if you can’t, or won’t, pay your debts.

If a creditor applies for your bankruptcy, the effects on you are the same as if you made yourself bankrupt, but the creditor pays the fees instead of you.

Most bankruptcy applications are made by people in debt who want to go bankrupt. Creditors are less likely to apply for bankruptcy because they have to pay a large fee up front. Because of this, most creditors would only consider doing this if they’re sure you have enough assets or income to guarantee the bankruptcy will get them all their money back.

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How does a creditor apply for bankruptcy?

Creditor bankruptcy if you live in England, Wales or Northern Ireland.

A creditor can make you bankrupt in England or Wales if you owe them more than £5,000 or in Northern Ireland if you owe them more than £750.

Two or more creditors can ‘club together’ if the amounts you owe are under these limits, but this is rare. For example, if you have live in Wales and have two debts of £3,000, the creditors could apply for your bankruptcy together so the total debt passes the £5,000 minimum.

There are three ways that a creditor can petition for your bankruptcy in England, Wales or Northern Ireland:

The process varies depending on which country you live in.

  • Send you a statutory demand – this letter gives you 21 days to pay the debt or come to an agreement to pay it, for example by instalments. If you don’t, the creditor can apply or ‘petition’ for your bankruptcy. This is the most common way that creditors will apply for your bankruptcy. If you receive a statutory demand you need to contact us as soon as possible.
  • You set up an individual voluntary arrangement (IVA) to repay your debts, but it failed because you didn’t make the payments. In this case, if your creditors agree to it, the insolvency practitioner dealing with your IVA can petition for your bankruptcy. Bankruptcy using this method is rare.
  • In England or Wales, enforcement agents have visited your home after a County Court judgment (CCJ) but found you don’t have enough goods to sell to pay off the debt. Bankruptcy by this method is also rare

Creditor bankruptcy if you live in Scotland

A creditor can make you bankrupt in Scotland if you owe them more than £3,000.

Two or more creditors can club together if the amounts you owe are under these limits, but this is rare. For example, if you have two debts of £2,000, the creditors could apply for your bankruptcy together so the total debt passes the £3,000 minimum.

If you live in Scotland a creditor can only petition for your bankruptcy if they can prove your ‘apparent insolvency’. To do this they will send you one of the following documents:

  • A charge of payment giving you 14 days to pay the debt, or
  • A statutory demand giving you 21 days to pay the debt

You can also be made bankrupt if you set up a protected trust deed to repay your debts, but it failed because you didn’t make the payments.

If you don’t pay the debt in this time you’ll receive a ‘warrant to cite’ which gives you a date for a court hearing.

Received a date for a bankruptcy hearing?

At the hearing you can explain why you don’t think you should be made bankrupt.

Even if you don’t plan to oppose the bankruptcy, you should still go to the hearing.

The court can take into account the history of the debt, what you’re able to pay and whether the creditor has acted fairly when considering any offers of payment you’ve made.

If you get a date for a bankruptcy hearing, contact us straight away for advice.

After the bankruptcy hearing

When you’re made bankrupt your case will be passed to a ‘trustee’. In England, Wales or Northern Ireland, this will be an official receiver, and in Scotland it will be the Accountant in Bankruptcy.

The trustee’s staff will contact you and ask for details of your income, living costs, assets and debts. You’ll be asked to fill in some forms giving this information.

The trustee will also explain what will happen for the rest of your bankruptcy. You must cooperate with the trustee, and you might face further court action if you don’t.

Help and advice

If you’ve received any documents relating to bankruptcy you need to contact us as soon as possible so we can advise you on the next steps you need to take. Call our helpline (free from all landlines and mobiles) and speak to one of our expert advisors, or use our online Debt Remedy tool.