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What is bankruptcy

Which debts are included in a bankruptcy?

You may be wondering what types of debt are included in bankruptcy. Bankruptcy writes off most types of debt, but not all of them.

Some debts included in bankruptcy are:

  • Credit cards
  • Utility arrears
  • Store cards
  • Overdrafts
  • Catalogue
  • Benefit overpayments (if they’re not fraudulent)

The rules around debt relief orders (DRO) have changed. These changes could benefit those considering an insolvency solution like bankruptcy. Please take a look at the changes, as for some people a DRO will be a cheaper alternative to full bankruptcy.

If you forget to list a debt in your bankruptcy application, don’t worry. The debt will still be included in your bankruptcy. It’s always best to be honest with the official receiver or trustee looking after your bankruptcy, so let them know about any debts you’ve forgotten to include on your forms.

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Which debts are excluded from bankruptcy?

The following debts will not be cleared by a bankruptcy. You’ll need to keep paying these.

  • Child maintenance arrears, if the arrangement was set by the CSA or Child Maintenance Service
  • Criminal fines, compensation orders and victim surcharges from a magistrates’ court or crown court
  • Debts you take out after the date of your bankruptcy order
  • Debts taken out fraudulently, for example benefit fraud
  • Mortgages and other debts secured against your home, if you want to keep the house
  • Social Fund loans
  • Student loans
  • TV Licence arrears
  • Court orders telling you to pay compensation to someone for personal injury
  • Payments ordered by a court as part of family proceedings, for example in divorce cases

Apart from a few other rare exceptions, all other debts will be written off by bankruptcy.

Are any secured debts included in bankruptcy?

If you have a car or other goods on a hire purchase or logbook loan agreement, the finance company will often cancel it when you go bankrupt. If they do you’ll have to hand the item back, but the debt will be included in your bankruptcy so there’ll be nothing more to pay.

In some cases you may be allowed to keep a vehicle or other goods bought on hire purchase or logbook loan. If you’re allowed to keep the goods, you’ll have to keep paying the debt.

Mortgages and secured loan debts are included in your bankruptcy if you:

  • give back the keys to your home, also known as ‘surrendering your property’, or
  • if your house gets repossessed

However, if you stay in your home, you’ll need to keep paying these as normal. If you don’t, the lender can repossess it.

Will joint debts be included in bankruptcy?

A joint debt is one that two people applied for at the same time and so are both named on the credit agreement.

If any of your debts are in joint names with someone else who isn’t bankrupt, the debts won’t be written off, but you won’t have to pay them.

This means any joint debts would become debts in the other person’s name only and they’d be responsible for paying off the remaining amount of the debt in full.

If you have any joint debts, you should think carefully about how this would affect the other person before you decide to go bankrupt.